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 is the ratio in which old partners give up their shares, typically calculated when a new partner is admitted.
Gaining Ratio is the ratio in which old partners gain shares, typically calculated when a partner retires or dies. 
Step 2: Goodwill treatment
New partner's share of goodwill is generally divided among old partners in sacrificing ratio, not gaining ratio. 
Goodwill paid to retiring partner is shared by remaining partners in gaining ratio. 
Step 3: Formulae 
Sacrificing Ratio = Old Ratio - New Ratio 
Gaining Ratio = New Ratio - Old Ratio
Step 4: Conclusion 
Statements (B) and (D) are correct; (A) and (C) are incorrect.