Which of the following ratios are calculated at the time of retirement or death of a partner?
A) New profit-sharing ratio
B) Sacrificing ratio
C) Gaining ratio
D) Capitalization Ratio
E) Activity ratio
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- A & C.
New profit-sharing ratio and gaining ratio are calculated at the time of retirement of a partner from a partnership firm.
Gaining ratio = The gaining ratio refers to the proportion in which the continuing partners acquire the share previously held by a retiring or deceased partner. Gaining ratio is calculated by subtracting old ratio from the new ratio.
New profit-sharing ratio = After the retirement or death of a partner, the new profit sharing ratio determines the distribution of future profits among the remaining partners.