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.
Profit and Loss Account
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.
Accounting software is an integral part of the computerized accounting system. The accounting software should be selected after considering the level of skill and proficiency of the accounting professionals.
What are Accounting Reports?
Accounting Reports: When the collected data is processed and manipulated in a useful sense that can be understood by the users without any ambiguity, then it becomes information.
Transaction Processing System
Transaction Processing System (TPS) refers to a computerized system that records, processes, validates, and stores routine transactions that occur in various functional areas of a business on daily basis.
What is Hidden Goodwill?
In the case of Hidden Goodwill, the value of goodwill is not mentioned at the time of admission of a new partner. It can be considered as one of the methods for calculating the value of goodwill of the firm.