The partner who contributes more capital will have a higher gaining ratio than the partner who contributes less capital. It is the proportion in which the remaining partners of a firm acquire the shares of the deceased or retiring partner. B has to bring in sufficient cash to pay off A and C. The partners used to share profits in the proportion of 2/5, 2/5 and 1/5. The partners decide to fix the capital of the new firm as Rs. 1,20,000 in the profit sharing ratio. R was to be paid Rs. 15,000 in cash, through bank and the balance was to be transferred to his loan account.
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Prepare Revaluation Account, Capital Accounts Partners and Balance Sheet of the new firm afier Kusum’s retirement. Amount due to Kusum be settled by paying Rs. 1,00,000 in cash and balance by transferring to her loan A/c which will be paid later on. Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the new firm on Harish’s retirement. That the provision for doubtful debts be increased to 5% on debtors. That provision for doubtful debts be brought upto 5% on debtors.
Prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita’s retirement. Bad debts provision is to be increased to Rs. 15,000. Instalments of Rs. 1, 00,000 which already includes interest @ 15% p.a. On the outstanding balance for the first four years and the balance including interest in the fifth year. The balance due to him was to be paid in three equal instalments annually together with interest @ 12% per annum. It was decided to pay off C by giving him this computer and the balance in annual instalments of Rs. 1,00,000 together with interest @ 10% p.a.
And the ratio used to represent the same is called the gaining ratio. You are required to record necessary journal entries to record the above adjustments on D’s retirement. You are also required to prepare his capital account to find out the amount due to him when his capital balance in the balance sheet was Rs. 1,50,000 before any adjustment. X, Y and Z were partners sharing profits in the ratio of 1/2, 3/10, and 1/5. Calculate the gaining ratio of the remaining partners.
Advantages and Disadvantages of Gaining Ratio
The what is gaining ratio for doubtful debts would be increased by Rs. 975. Sohan’s executor was paid Rs. 1,400 on 1st July 2017 and the balance in four equal yearly installments starting from 30th June 2018 with interest @ 6% pa. The net amount payable to E’s executors was transferred to his Loan Account, to be paid later on. Prepare R’s Capital Account also at the time of his death to he presented to his executors. The capital to his credit at the time of his death and interest thereon @ 8% per annum.
Pass the necessary journal entries and write the account of the executors of N. Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/ deficit, if any in their Capital Accounts will be adjusted through Current Accounts. Give necessary ledger accounts, the Balance Sheet of the firm after G’s retirement and G’s Loan Account till it is finally paid off.
Reserve for bad and doubtful debts to be maintained at 10% on debtors. Prepare necessary entries and the new balance sheet. 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her Loan Account. Prepare Revaluation Account, Partners’ Capital Accounts and Madhur’s Loan Account till the loan is finally paid off. That B be paid Rs. 50,000 in cash and the balance be transferred to his Loan A/c.
Madhur was paid Rs. 10,300 in cash and the balance was transferred to his loan account payable in two equal instalments together with interest @12% p.a. Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s retirement. Deepak be paid Rs. 2,000 in cash and balance be transferred to his loan account.
The calculation of sacrificing ratio helps to compute the amount of compensation that will be paid by newly admitted partners as goodwill or premium for goodwill to sacrificing partners. Now that we have become somewhat familiar with the feasible situations for applying gaining ratio let’s try to find out the basic differences between sacrificing ratio and gaining ratio. Typically, during the admission, death, or retirement of a partner, there is a need for the calculation of sacrificing and gaining ratio. Kavya was to be paid Rs. 20,000 through a bank draft and the balance was transferred to her loan account which will be paid in two equal annual instalments together with interest @10% p.a. Prepare Revaluation A/c, Partner’s Capital accounts and Kavya’s Loan Account till it is finally paid.
Disadvantages of Sacrificing Ratio:-
Goodwill according to his proportion of the total profits for the three preceding years, which were Rs. 80,000; Rs. 1,30,000 and Rs. 1,50,000 respectively. The net profits of the business for the three preceding years amounted to Rs. 33,500; Rs. 41,500 and Rs. 40,500, respectively. Show the accounts as between the firm and Smith’s executors as on May 1st, 2018. That in the event of the death of a partner, his executors be entitled to be paid. The amount payable to C is agreed to be paid in two yeariy instalments of Rs. 2,00,000 each including interest @ 10% p.a. On the outstanding balance during the first two years and the balance including interest in the third year.
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Prepare Partner’s Capital Accounts, Y‘s Executor’s Account and Balance Sheet of the surviving partners X and Z. You are required to prepare A’s Capital Account as at the date of death, for a settlement with his executors. There is no need of provision for doubtful debts, as the debtors are all good. Share of profit from the closing of the last financial year to the date of death on the basis of last year’s profit. Profits for the year 2016, 2017 and 2018 were Rs. 8,000; Rs. 12,000 and Rs.7,000 respectively.
Reference book solutions
If the new profit sharing ratio of the remaining partners is given in the question, gaining ratio is calculated by deducting old ratio from the new ratio. Gaining ratio in partnership refers to the ratio in which the remaining partners acquire the share of the outgoing partner. It is calculated to determine the new profit-sharing ratio among the continuing partners after the retirement or death of a partner. X, Y and Z are partners sharing profits in the ratio of 1/2, 2/5 and 1/10. Find the new ratio of remaining partners, if Z retires.
- The net profits of the business for the three preceding years amounted to Rs. 33,500; Rs. 41,500 and Rs. 40,500, respectively.
- The partners used to share profits in the proportion of 2/5, 2/5 and 1/5.
- A ’s capital on 3lst March, 2018 stood at 71,20,000, and his drawings from then to thedate of death amounted to Rs. 9,000.
- Pass necessary journal entries for the above transactions in the books of the firm on Sameer’s retirement.
- New profit sharing ratio of B, C and D on A’s death.
The outgoing partner’s share is distributed among the remaining partners in the gaining ratio ratio. However, they all use a standard financial measure, namely, the gaining ratio to ascertain each partner’s share of profit accurately. The share of profit of deceased partner to be computed upto the date of death on the basis of average profits of the past three years Which was Rs. 80,000.
Proportion of share gained is not given
B to be paid Rs. 9,000 in cash and the balance to be transferred to his Loan Account. Provision for bad and doubtful debts be increased to 5% on debtors. Provision for doubtful debts was to be maintained at 20% on debtors. Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of K and M after L’s retirement.
Premises to be appreciated by 20%, Stock to be depreciated by 10% and Provision for doubtful debts was to be maintained @ 5% on Debtors. Further, provision for legal damages is to be increased by 1,200 and furniture to be brought up to Rs. 45,000. Land and Buildings were revalued at Rs. 94,000, Machinery at Rs. 38,000 and Stock at Rs. 5,000. A provision of 2.5% was to be created on debtors for bad and doubtful debts.
Prepare necessary ledger accounts and balance sheet of the firm after A ’s retirement. On the death or retirement of a partner or change in profit sharing ratio by mutual consent. The Gaining Ratio is calculated when a partner quit or retire from the business, and the other continues to do the business in that company. The gain ratio is also known as the retirement of a partner. Both sacrificing ratio and gaining ratio involve trade-offs, where one aspect of a decision or situation is improved at the expense of another aspect.
Manohar retires and his share is taken up by Kumar and Kesavan equally. Find out the new profit sharing ratio and gaining ratio. The remaining partners receive the advantage as the partner retires. So, the profit-sharing ratio which the retiring partner leaves behind is taken by the remaining partners of the firm. Hence, the continuing partners gain a certain proportion out of the share of the retiring partner. The remaining partners gain this additional share, out of the retiring partner’s share, either in the earlier relative ratio or in an agreed ratio.
His share of profit in the year of his death was to be computed on the basis of average profits of past two years. And pass the necessary journal entries for the treatment of goodwill and his share of profit. Prepare capital accounts and the revised balance sheet. B) Deceased partner’s share of profit up to the date of his/her death. Solution 6The legal executive of the deceased partner is entitled for the balancing figure of deceased partner’s capital account. Event Admission of new partner, share acquired by one partner from other partners, or change in profit sharing ratio by mutual consent.
On 1st April, 2018 A, B and C were partners sharing profits and losses in the ratio of A 5/10, B 3/10 and C 2/10 respectively. The new profit sharing ratio of A and C will be A 3/5 and C 2/5. On 1st April, 2018 Ashish, Namish and Aman were partners sharing profits and losses in the ratio 2/5, 2/5 and 1/5 respectively.
When new profit sharing ratio, share gained and the proportion of share gained is not given, the new share is calculated by assuming that share gained is the proportion of the old share. Therefore, the new profit sharing ratio and the gaining ratio among the continuing partners is their old profit sharing ratio between them. Goodwill of the firm was valued at Rs. 3,00,000 and Anita’s share of goodwill was adjusted in the capital accounts of the remaining partners, Gaurav and Sonu. ‘Gaining Ratio’ is a term that is frequent in the Partnership Accounts. This ratio means the share of profit gained by a partner with some reconstitution of the firm. This gaining ratio is caused by the reconstitution which generally happens due to the exit or death of any existing partner.
Information gain is used for determining the best features/attributes that render maximum information about a class. It follows the concept of entropy while aiming at decreasing the level of entropy, beginning from the root node to the leaf nodes. In the blog discussion, we will discuss the concept of entropy, information gain, gini ratio and gini index. Meaning of Retirement Retirement of a partner means ceasing to be a partner of the firm.
By way of goodwill his proportion of the total profits for the three preceding years. Share of goodwill on the basis of four years purchase of last three years average profit. His share of profit up to his date of death on the basis of sales till date of death. Sales for the year ended March 31, 2019 was Rs. 4,00,000 and profit for the same year was Rs. 80,000.
- 4.) His share of profit on the revaluation of assets and liabilities.
- It is the proportion in which existing partners of a firm surrender a share of their profit for a newly admitted partner.
- Show the new share of partners and pass necessary journal entry.
- Solution 1.Goodwill earned by the firm is the result of the efforts of all the existing partners in the past.
In a partnership firm, the admission, retirement, or death of a partner tends to lay a significant impact not just on the structure of a firm but also on how profit and loss are shared among all partners. A and C will continue to carry on the business and shall share profits and losses equally in future. It was decided to fix the capital of the new firm at Rs. 40,000 and capital accounts of Raja and Badshah be adjusted accordingly and any difference be either paid / brought in cash. A, B and C are in partnership, sharing profits in the proportion of two—thirds, one-sixth Respectively. Following is the Balance Sheet of Kusum, Sneh and Usha as at 31st March 2018, who have agreed to share profits and losses in proportion of their capitals. New ratio of the remaining partners will be calculated by striking out the share of the retiring partner.
Gaining ratio is the ratio in which the retiring partner’s share is acquired by continuing partners. It is computed by deducting old ratio from the new ratio. Sacrificing ratio refers to the ratio in which the old partners sacrifice their share in the profits for the new partner or any other partner of the business. Gaining ratio refers to the ratio in which the remaining or continuing partners acquires the share of profit from the retiring partner. The ratio by which they share the profits is known as gaining ratio. B’s share of profit from the closure of the last accounting year till the date of death was to be calculated on the basis of the average of three completed years of profits before death.
Calculate the new profit sharing ratio of K and Z. By giving notice in writing to all other partners of his intention to retire, in case of partnership at will. Factors that can affect the gaining ratio include the cost of the investment, the return on investment, and the overall market conditions. Sacrifice ratio refers to the ratio of the cost of achieving a certain outcome or goal to the benefits of achieving that outcome or goal. It is often used in the context of economic decision-making, where the ratio is used to compare the costs and benefits of different options or courses of action. In general, a lower sacrifice ratio is considered to be more favorable, as it suggests that the benefits outweigh the costs.
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