Select the appropriate ratio for the following events. Match List-I w…

Select the appropriate ratio for the following events. Match List-I with List-II

List-I (Events)

(A) General Reserve

(B) Retirement of a partner

(D) Adjustment of Capitals at the time of Admission

List-II (Ratio)

(I) Gaining Ratio

(II) Old Profit Sharing Ratio

(III) New Profit Sharing Ratio

(IV) Sacrificing Ratio

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A) - (II), (B) - (I), (C) - (IV), (D) - (III)

Each event in reconstitution has its own ratio, decided by who the item belongs to or who gains and who gives up.

(A) General Reserve — this matches (II) Old Profit Sharing Ratio. The reserve is profit earned before the change, so it goes to the partners of that time in their old ratio.

(B) Retirement of a partner — this matches (I) Gaining Ratio. The remaining partners take over the retiring partner’s share, and they pay for his goodwill in the ratio of what they gain.

(C) Admission of a partner — this matches (IV) Sacrificing Ratio. The old partners give up shares to the newcomer, and the premium for goodwill is shared in the ratio of their sacrifice.

(D) Adjustment of Capitals at the time of Admission — this matches (III) New Profit Sharing Ratio. Capitals are made proportionate to the shares in future profits, that is, to the new ratio.

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “5. Adjustment for reserves and accumulated profits/losses: If, at the time of admission of a partner, any reserve and accumulated profits or losses exist in books of the firm, these should be transferred to old partner’s capital/current accounts in their old profit sharing ratio. 6. Determining/Adjusting partners’ capital: If agreed, the partner’s capital may be adjusted so as to be proportionate to their new profit sharing ratio.”

NCERT (2026-27 edition):
Treatment of Goodwill – “When goodwill does not appear in the books of the firm, credit is given to the retiring partner for the share in goodwill by debiting the goodwill account to gaining partners capital accounts (individually) in their gaining ratio.”

NCERT (2026-27 edition):
Sacrificing Ratio – “… As stated earlier, the new partner is required to compensate the old partner’s for their loss of share in the super profits of the firm for which he brings in an additional amount as premium for goodwill. This amount is shared by the existing partners in the ratio in which they forgo their shares in favour of the new partner which is called sacrificing ratio.”