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On retirement of a partner, gaining ratio is computed as
ACapital ratio
BOld ratio − New ratio
CNew ratio + Old ratio
DNew ratio − Old ratio
Answer & Solution
Correct answer: D. New ratio − Old ratio
1. When a partner retires, the continuing partners' shares increase.
2. Gaining ratio = New ratio − Old ratio (positive values).
3. It indicates how much each remaining partner gains and is used to compensate the retiring partner for goodwill.
4. Hence (A) is correct.
_Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 4 "Reconstitution of Partnership (Retirement of Partner)", §4.1 ¶§4.1_