On the eve of the retirement/death of a partner, the continuing partners acquire the profit share of the retiring partner. The ratio in which the outgoing partner’s profit share is gained or acquired by the remaining partners is known as the Gaining ratio. This ratio is calculated by taking the difference between the new ratio and the old ratio of the partners.
Algebraically, Gaining Ratio = New Profit Sharing Ratio – Old Profit Sharing Ratio
Example: P, Q, and R are three partners in firm sharing profits and losses in the ratio of 4 : 3 : 2. On April 01, 2011, Q retires from the firm. Calculate the gaining ratio.
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