Distinguish between sacrificing ratio and gaining ratio.

Basis of Difference

Sacrificing ratio

Gaining Ratio

1. Meaning

It is the ratio in which old partners agree to sacrifice their share of profit in favour of new partners/partner

It is the ratio in which continuing partner acquires the share of profit from outgoing partner/partner

2. Calculation

Sacrificing Ratio = Old Ratio – New Ratio

Gaining Ratio = New Ratio – Old Ratio

3. Time

It is calculated at the time of admission of new partners/partner.

It is calculated at the time of retirement/death of old partners/partner.

4. Objective

It is calculated to ascertain the share of profit and loss given up by the existing partners in favour of new partners/partner.

It is calculated to ascertain the share of profit and loss acquired by the remaining partners (of the new firm in case of retirement) from the retiring or deceased partner.

5. Effect

It reduces the profit share of the existing partners.

It increases the profit share of the remaining partners.

 

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