what is gain ratio class 12

Gaining ratio is a term used in partnership accounts to measure the proportion in which a firms remaining partners acquire the retiring partner or deceased partners shares. It is calculated when a partner quits or retires from the business, and the other continues to do the business in that company. The gaining ratio is the share of profit gained by a partner with some reconstitution of the firm. It can also be defined as the difference between the old profit-sharing ratio and the new profit-sharing ratio of partners. The gaining ratio is required to calculate the amount by which gaining partners capital accounts are to be debited to compensate for sacrificing partner or to make an adjustment of the present value of goodwill among partners. The gaining ratio is the proportion of the profit which is gained by the continuing partner. It is computed by dividing the share gained by the continuing partners by the total share of the outgoing partner. The gaining partner is the partner whose share has increased due to a change in profit-sharing ratio. The new profit-sharing ratio is the ratio in which partners have decided to share the future profits and losses. The gaining ratio is an important factor for the partners as well as for the newly re-constituted firm. It is mostly calculated during the admission, death, or retirement of a partner.