— Kishore V, SME and ACW at Edumarz
Basis | Sacrificing Ratio | Gaining Ratio |
Objective | It is computed to determine the existing partner’s share of profit or loss in favour of a new partner. | It is computed to determine the surviving partners’ share of profit and loss from the retiring or deceased partner. |
Meaning | It’s the ratio in which partners agree to give up a portion of their earnings to a new partner. | It’s the percentage by which the remaining partners get a piece of the earnings from the retiring or deceased partner. |
Time | It is determined at the moment of a new partner‘s entrance. | It is computed at the time of an elderly partner’s retirement or death. |
Effect | Sacrificing Ratio = Old Ratio – New Ratio | Gaining Ratio = New Ratio – Old Ratio |
Calculation | Existing partners’ profit-sharing ratio is reduced. | It raises the remaining partners’ profit-sharing ratio. |