Question

Which of the following is correct regarding difference between sacrificing and gaining ratio? 
(A) Gaining Ratio is a more suitable parameter to measure new profit sharing ratio than Sacrificing Ratio. 
(B) Sacrificing Ratio is calculated at the time of the admission of the partner while Gaining Ratio is calculated at the time of retirement or death of the partner. 
(C) New partner's share of goodwill is divided between the old partners in gaining ratio while Goodwill paid to retiring partner is paid by the remaining partners in their Sacrificing ratio. 
(D) Sacrificing Ratio = Old Ratio - New Ratio and Gaining Ratio = New Ratio - Old Ratio. 
Choose the correct answer from the following options:

• A. B and D only
• B. A and C only
• C. A, B and D only
• D. Only B

Hint:

Sacrificing ratio applies at admission; gaining ratio applies at retirement/death; goodwill sharing corresponds accordingly.

Answer 1

The Correct Option is A

Step 1: Definitions
Sacrificing Ratio: The proportion in which existing partners surrender their ownership stakes, commonly determined upon the admission of a new partner.
Gaining Ratio: The proportion in which existing partners acquire ownership stakes, typically calculated when a partner withdraws or passes away. 
Step 2: Goodwill Accounting
A new partner's goodwill contribution is usually distributed among the existing partners according to the sacrificing ratio, not the gaining ratio. 
Goodwill allocated to a retiring partner is shared among the remaining partners based on the gaining ratio. 
Step 3: Formulas 
Sacrificing Ratio = Old Ratio - New Ratio 
Gaining Ratio = New Ratio - Old Ratio
Step 4: Findings 
Assertions (B) and (D) are accurate; assertions (A) and (C) are inaccurate.