Ashok, Anil and Ajay are partners sharing profits and losses in the ratio of 1/2, 3/10 and 1/5. Anil retires from the firm. Ashok and Ajay decide to share future profits and losses in the ratio of 3:2. Calculate the gaining ratio.
The Gaining Ratio is 1:2.
Explanation
The Gaining Ratio is calculated by determining the difference between the New Profit Sharing Ratio and the Old Profit Sharing Ratio for the continuing partners. The context illustrates in Illustration 4 that the gain is calculated by subtracting the old share from the new share (New Share - Old Share). Since Anil is retiring, his share is acquired by Ashok and Ajay, resulting in a gain for them. Ashok gains 1/10 share while Ajay gains 2/10 share, resulting in a gaining ratio of 1:2.
Solution Steps
Step 1: Calculate the Old Profit Sharing Ratio. Ashok's Share = 1/2 = 5/10 Anil's Share = 3/10 Ajay's Share = 1/5 = 2/10 Old Ratio (Ashok, Anil, Ajay) = 5:3:2.
Step 2: Identify the New Profit Sharing Ratio. Ashok and Ajay decide to share future profits in the ratio of 3:2. Ashok's New Share = 3/5 = 6/10. Ajay's New Share = 2/5 = 4/10.
Step 3: Calculate the Gaining Ratio. Gaining Ratio = New Share - Old Share Ashok's Gain = 6/10 - 5/10 = 1/10 Ajay's Gain = 4/10 - 2/10 = 2/10 Gaining Ratio (Ashok : Ajay) = 1/10 : 2/10 = 1:2.