Question:
Old Ratio \(-\) New Ratio = ________ Ratio.
Old Ratio \(-\) New Ratio = ________ Ratio.
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Conversely, if Old Ratio \(-\) New Ratio yields a negative value, it means the partner has gained. The formula for Gaining Ratio is usually stated as: New Ratio \(-\) Old Ratio.
Updated On: Mar 16, 2026
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Solution and Explanation
Step 1: Understanding the Concept:
When there is a reconstitution of a partnership firm (like the admission of a new partner or a change in profit-sharing ratio), the existing partners often have to give up a portion of their profit share in favor of the new or gaining partner.
Step 2: Detailed Explanation:
If the Old Ratio is greater than the New Ratio, the difference is positive, indicating that the partner has "sacrificed" a part of their share. This sacrificing ratio is crucial for distributing the premium for goodwill brought in by a new partner among the sacrificing partners.
Step 3: Final Answer:
Old Ratio \(-\) New Ratio = Sacrificing Ratio.
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