When there's a change in the profit-sharing ratio of a partnership firm (due to retirement, admission, or change in ratio), partners either gain or sacrifice their share.
A continuing partner gains when their share in profits increases from the old arrangement to the new arrangement.
Formula:
Gaining Share = New Share - Old Share
Understanding the logic:
If the new share is greater than the old share, the difference represents what the partner has gained.
For example:
- A partner's old share = 52
- A partner's new share = 53
- Gaining share = 53−52=51
The partner has gained 51 share in the profits.
Note: If New Share < Old Share, the result would be negative, indicating the partner is sacrificing rather than gaining. In such cases, the Sacrificing Share = Old Share - New Share (to express it as a positive value).
The correct option is Option 3: New share – Old share