DIFFERENCE B/W GAINING & SACRIFICING RATIO
Before understanding the difference between Gaining & Sacrificing Ratio, one must learn the meaning of both terms which is as follows:
Sacrificing ratio is the ratio in which old or existing partners forego, i.e., sacrifice their share of profit in favor of the new or incoming partner. This share may be given or sacrificed to the new or incoming partner by all the old partners equally or by all or some of the partners in agreed ratio.
SACRIFICING RATIO= OLD SHARE- NEW SHARE
The ratio in which the continuing partners acquire the outgoing partner’s share is called the gaining ratio. It is the ratio in which the remaining partners will pay the amount of goodwill to the retiring partner. This ratio is calculated by deducting old share in profits from the new share in profits.
GAINING RATIO= NEW RATIO-OLD RATIO
The Difference between Gaining & Sacrificing Ratio
|BASIS OF DIFFERENCE
|It is the ratio in which old partner surrender a part of their share in the favour of new partner.
|It is the ratio in which the remaining partners acquire the outgoing partner’s share.
|Sacrificing ratio is calculated at the time of the admission of the partner.
|Gaining ratio is calculated at the time of death or retirement of the partner.
|PURPOSE OF CALCULATION
|It is calculated to determine the amount of compensation to be paid by the incoming partner to the sacrificing partner as premium for goodwill or goodwill.
|It is calculated to determine the amount of compensation to be paid by each of the gaining partner to the outgoing partner as premium for goodwill or goodwill.
|Old Ratio- New Ratio
|New Ratio- Old ratio
|Sacrifice ratio reduces the share of profit of old partner.
|Gaining ratio increases the share of profit of continuing partners.