At the time of retirement of a partner, the difference between the ol…

At the time of retirement of a partner, the difference between the old Profit Sharing Ratio and the new Profit Sharing Ratio is a negative outcome for a remaining partner. It indicates that :

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Remaining partner is gaining

For each remaining partner, the change in share is found from his old and new shares. The question takes old share minus new share. If this comes out negative, the new share is bigger than the old share, so the partner has gained part of the retiring partner's share. (A positive result would mean he has sacrificed.)

Example: old share 2/5, new share 3/5; old - new = -1/5, so the partner gains 1/5.

Why the other options are incorrect

Option (2) Remaining partner is sacrificing — Incorrect. A partner sacrifices only when his new share is smaller, which gives a positive difference.
Option (3) Outgoing partner is sacrificing — Incorrect. The difference is worked out for a remaining partner; the outgoing partner leaves with his whole share and has no new share to compare.
Option (4) Outgoing partner is gaining — Incorrect. The outgoing partner gives up his share; he cannot gain in future profits.

NCERT (2026-27 edition):
Gaining Ratio – “The ratio in which the continuing partners have acquired the share from the retiring/deceased partner is called the gaining ratio.”

NCERT (2026-27 edition):
Gaining Ratio – “… The problem of calculating gaining ratio arises primarily when the new profit sharing ratio of the continuing partners is specified. In such a situation, the gaining ratio should be calculated by, deducting the old share of each continuing partners from his new share i.e., new profit share minus old profit share, i.e., new profit share minus old profit share.”