(a) Anup, Bharti and Manoj were partners in a firm sharing profits and losses in the ratio of 11 : 8 : 1. From

Question

Q. (a) Anup, Bharti and Manoj were partners in a firm sharing profits and losses in the ratio of 11 : 8 : 1. From 1st April, 2025, they decided to share the future profits in the ratio of 2 : 2 : 1. The gain or sacrifice of each partner due to change in profit sharing ratio will be : (A) Anup's gain 3/20, Manoj's sacrifice 3/20 (B) Anup's sacrifice 3/20, Manoj's gain 3/20 (C) Anup's gain 3/20, Manoj's gain 3/20 (D) Anup's sacrifice 3/20, Manoj's sacrifice 3/20

(OR)

(b) Arun, Varun and Tarun were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2025, Arun died. Varun and Tarun decided to share future profits equally. The gaining ratio of Varun and Tarun will be : (A) 1 : 1 (B) 3 : 2 (C) 2 : 3 (D) 5 : 2

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Part (a)Concept understanding — Sacrificing Ratio Definition

Let’s start with something you already know from everyday life.

Suppose you and your friend share a pizza equally — half each. One day, your friend says, “I’m not that hungry, you can have a bigger slice today.” So you take 60% and your friend takes 40%. Your friend has sacrificed 10% of the pizza in your favour. That 10% is the sacrificing ratio — the share your friend gave up so you could have more.

Now bring this into a partnership firm. Partners share profits in a fixed ratio (say 3:2). When a new partner is admitted, the old partners have to give up a part of their share to make room for the newcomer. The proportion in which they give up their shares is called the sacrificing ratio.

Precise meaning

Important

Sacrificing ratio = Old ratio – New ratio (for each old partner).

If the result is positive, that partner has sacrificed. If negative, that partner has gained (which is called the gaining ratio, used at retirement).

For example, if A and B share profits 3:2, and they admit C for a 1/5th share, the new ratio might become 2:2:1. Then:

A’s sacrifice = 3/5 – 2/5 = 1/5
B’s sacrifice = 2/5 – 2/5 = 0

So A alone sacrifices 1/5th of the total profit. That 1/5th is the sacrificing ratio between A and B — here it’s simply 1:0.

Why does it matter?

Because the new partner brings in goodwill (a premium) to compensate the old partners for the share they gave up. That goodwill is distributed among the sacrificing partners in their sacrificing ratio. If you don’t calculate the sacrificing ratio correctly, you’ll distribute the goodwill unfairly — and that’s a serious accounting error.

Accounting treatment

When the new partner brings in his share of goodwill in cash:

Journal entry:
- Debit: Cash/Bank A/c (with the amount brought in)
- Credit: Premium for Goodwill A/c (with the same amount)
Then the premium is distributed to the sacrificing partners:
- Debit: Premium for Goodwill A/c
- Credit: Old Partners’ Capital A/cs (individually, in sacrificing ratio)

If the new partner does not bring in cash, the adjustment is done through the capital accounts directly (the new partner’s capital is debited, and the old partners’ capitals are credited).

Format: Capital Accounts (showing goodwill adjustment) …

Part (b)Concept understanding — Partner Retirement Methods

Partner Retirement Methods – A First Look

Think of a partnership like a three-legged race. Three friends tie their legs together and run. Now imagine one friend wants to stop running mid-race. The other two can't just untie and keep going — they have to settle accounts with the leaving friend first. How much does the leaving friend get? Who pays? That's what retirement of a partner is about.

What Does "Retirement of a Partner" Mean?

When a partner leaves the firm (by choice, age, or agreement), the remaining partners continue the business. The retiring partner is entitled to their share of the firm's net worth — not just their original capital, but also their share of accumulated profits, reserves, revaluation gains, and goodwill.

The key idea: the retiring partner's claim = what they brought in + what the firm earned on their behalf – what they've already taken out.

Why Does This Matter?

If you just give the retiring partner their capital back, you're shortchanging them. The firm may have grown, built up reserves, or owned assets that appreciated. Conversely, if the firm has losses, the retiring partner must bear their share. Proper accounting ensures fairness — no one gets cheated, and the remaining partners don't overpay.

The Accounting Treatment – Step by Step

The NCERT Class-12 textbook follows a clear sequence. Let's walk through it.

Step 1: Revalue Assets and Reassess Liabilities

The firm's balance sheet may not reflect current values. So we create a Revaluation Account.

Note

Revaluation Account is a nominal account. It captures gains (credit) and losses (debit) from revaluing assets and liabilities.

Journal entry:

If asset value increases: Debit Asset A/c, Credit Revaluation A/c
If liability increases: Debit Revaluation A/c, Credit Liability A/c

The profit or loss on revaluation is then transferred to all partners' capital accounts in their old profit-sharing ratio.

Step 2: Adjust for Goodwill

The retiring partner is entitled to their share of the firm's goodwill. The remaining partners compensate them because they'll continue to benefit from the firm's reputation.

Treatment (as per NCERT):

Calculate the firm's total goodwill (agreed value).
Retiring partner's share = Total goodwill × Retiring partner's profit share.
The remaining partners debit their capital accounts in their gaining ratio (new ratio – old ratio) and credit the retiring partner's capital account.

Journal entry:

Remaining Partners' Capital A/c (individually)   Dr.
    To Retiring Partner's Capital A/c

Step 3: Transfer Reserves and Accumulated Profits

Any General Reserve, Profit & Loss A/c (credit balance), or accumulated profits belong to all partners. The retiring partner's share is transferred to their capital account.

Journal entry:

General Reserve A/c   Dr.
Profit & Loss A/c     Dr.
    To All Partners' Capital A/c (in old ratio)

Step 4: Settle the Retiring Partner's Account

After all adjustments, the retiring partner's capital account shows the final amount due. This is paid either in cash or transferred to a loan account if the firm can't pay immediately.

Journal entry:

Retiring Partner's Capital A/c   Dr.
    To Bank A/c (or Retiring Partner's Loan A/c)

The Capital Account Format (as per NCERT)

Here's how a retiring partner's capital account looks in the ledger:

Dr.	Retiring Partner's Capital Account	Cr.
Particulars	Amount (₹)	Particulars
To Revaluation A/c (loss)	xxx	By Balance b/d
To Goodwill A/c (if written off)	xxx	By Revaluation A/c (gain)
To Retiring Partner's Loan A/c	xxx	By General Reserve A/c
To Bank A/c (final payment)	xxx	By Profit & Loss A/c
		By Goodwill A/c (remaining partners)
		By Interest on Capital (if any)
Total	xxx	Total

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Part (a): Anup sacrifices 3/20, Manoj gains 3/20 — option (B).

Part (b): Gaining ratio of Varun and Tarun = 2:3 — option (C).

Part (a)

Sacrifice/gain = Old share − New share (positive = sacrifice, negative = gain). Using denominator 20:

Old: Anup 11/20, Bharti 8/20, Manoj 1/20
New (2:2:1): Anup 8/20, Bharti 8/20, Manoj 4/20
Anup: 11/20 − 8/20 = +3/20 → sacrifice 3/20
Bharti: 0 → no change …

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 173 on this concept.

CBSE 2026Set MARCH1 markMCQ
$Q. When only old profit-loss sharing ratio is given, gaining ratio of remaining partners will be _____.$
(a) 1 : 1
(b) Old ratio
(c) Capital ratio
(d) Can not be calculated
›Reveal solutionSolution

With only the old ratio available, the gaining ratio of the remaining partners is the old ratio, so the answer is (b).

Gaining ratio = new ratio minus old ratio. If the new ratio is not specified, the assumption is that the continuing partners take over the retiring/deceased partner's share in the s …

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CBSE 2026Set MARCH1 mark
$Q. What is gain ratio?$
›Reveal solutionSolution

Gain ratio = New ratio minus Old ratio; it is the proportion in which continuing partners take over the outgoing partner's share.

When a partner retires or dies, the share of profit released by that partner is taken up by the remaining partners. The proportion in which they acquire this share is called the gain (or gaining) ratio.

Gain ratio = New profit-sharing ratio - Old profit-sharing ratio

…

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CBSE 2026Set MARCH1 mark
$Q. In the case of death of a partner, the amount due to the deceased partner is transferred to his ______ account.$
›Reveal solutionSolution

On the death of a partner, the amount due is transferred to the Deceased Partner's Executor's Account.

When a partner dies, his Capital Account is credited with his capital, his share of accumulated profits/reserves, revaluation profit, share of goodwill, interest on capital and his share of profit up to the date of death, and debited with drawings and any losses. The resulting balance (the amount due) is then transferred out of his Capital Account:

Journal Entry
Deceased Partner's Capital A/c Dr.

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CBSE 2026Set MARCH1 markMCQ
$Q. A, B and C are partners sharing profits in the ratio of 5 : 3 : 2. If C retires, the New Profit Sharing Ratio between A and B will be :$
(a) a) 3 : 2
(b) b) 5 : 3
(c) c) 5 : 2
(d) d) 1 : 1
›Reveal solutionSolution

Without any fresh agreement, the remaining partners keep their old mutual ratio, so the new ratio of A and B is 5 : 3 - option (b).

A, B and C shared profits 5 : 3 : 2. On C's retirement, C's share (2/10) is taken over by A and B. When nothing else is stated, the remaining partners share future profits in their existing relative proportion, i.e. 5 : 3.

…

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CBSE 2026Set MARCH1 mark
$Q. Old Ratio - New Ratio = __________ Ratio.$
›Reveal solutionSolution

Old Ratio - New Ratio = Sacrificing Ratio.

On admission of a partner, the existing partners surrender a portion of their profit share in favour of the incoming partner. The proportion in which they surrender is the sacrificing ratio, calculated as the difference between each old partner's old share and new shar …

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CBSE 2026Set MARCH1 mark
$Q. Profit or loss on revaluation is transferred to all partners' capital accounts in case of retirement of a partner. [State True/False]$
›Reveal solutionSolution

The statement is True - revaluation profit/loss goes to all partners in the old ratio on retirement.

When a partner retires, assets and liabilities are revalued so that the retiring partner gets the benefit or bears the burden of changes that occurred while he was a partner. The profit or loss shown by the Revaluation Account therefore relates to the period during which the retiring partner was present, and it is distributed among all partners (old + retiring) in their …

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CBSE 2026Set ANNUAL1 markMCQ
$Q. Consider the following statements: Statement (I): Sacrificing Ratio = Old Profit and Loss sharing ratio - New Profit and Loss sharing ratio. Statement (II): Super profit = Average profits - Normal profits. Choose the correct answer from the following options: A) Only statement (I) is wrong B) Only statement (II) is correct C) Statement (I) is wrong and statement (II) is correct D) Both statements (I) and (II) are correct$
›Reveal solutionSolution

Both definitions are standard and correct, so option (D) applies.

Statement (I): Sacrificing Ratio = Old profit-sharing ratio - New profit-sharing ratio. This is the correct formula; it measures the share old partners give up to the incoming/gaining partner.

…

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CBSE 2026Set ANNUAL1 markMCQ
$Q. If Nisha and Komal are sharing profits in the ratio of 4 : 3. They decided to distribute profits equally in future. The sacrifice of Nisha will be A) 1/14 B) 4/14 C) 4/7 D) 3/7$
›Reveal solutionSolution

Nisha's sacrifice on moving from a 4:3 ratio to an equal ratio is 1/14 — option (A).

Old ratio of Nisha and Komal = 4 : 3, so Nisha's old share = 4/7.

New ratio = equal = 1 : 1, so Nisha's new share = 1/2.

Sacrifice = Old share - New share

= 4/7 - 1/2

= 8/14 - 7/14

= 1/14

…

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CBSE 2026Set ANNUAL1 markMCQ
$Q. Seema, Madhu and Shweta are partners in the ratio of 2 1/3 : 3 1/3 : 4 1/3 in a firm. Shweta retired from the firm. Gaining ratio will be A) 7 : 13 B) 7 : 10 C) 10 : 13 D) 13 : 7$
›Reveal solutionSolution

After converting the mixed numbers, the old ratio is 7 : 10 : 13; on Shweta's retirement the gaining ratio of Seema and Madhu is their old ratio 7 : 10 — option (B).

First convert the profit-sharing ratio:

2 1/3 : 3 1/3 : 4 1/3 = 7/3 : 10/3 : 13/3

Multiplying each by 3 = 7 : 10 : 13 (Seema : Madhu : Shweta).

…

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CBSE 2026Set ANNUAL1 mark
$Q. Mahaveer and Jitendra are partners in a firm sharing profits in the ratio of 4 : 3. They admitted Vaibhav for 1/5th share in profit, which he received from Jitendra. Calculate the sacrificing ratio.$
›Reveal solutionSolution
Only Jitendra sacrifices his 1/5th share, so the sacrificing ratio is entirely Jitendra's (Mahaveer nil).

Mahaveer and Jitendra share profits 4 : 3. Vaibhav is admitted for a 1/5th share, which he takes wholly from Jitendra.

Mahaveer's sacrifice = 0 (his share is unchanged).

Jitendra's sacrifice = 1/5 (he alone gives up the share). …
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CBSE 2026Set ANNUAL1 mark
$Q. Which account is credited, when lump-sum payment is made to retiring partner?$
›Reveal solutionSolution

On a lump-sum settlement, the Cash/Bank Account is credited.

The amount finally due to a retiring partner is paid out of the firm's cash. The entry is:

Retiring Partner's Capital A/c ... Dr

To Cash/Bank A/c

…

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CBSE 2026Set ANNUAL1 mark
$Q. Fill in the blank: Sacrificing ratio is always ________ to gaining ratio.$
›Reveal solutionSolution

Answer: Opposite / reverse.

Sacrificing ratio = Old ratio - New ratio (share given up), while gaining ratio = New ratio - Old ratio (share acquired). They are computed in opposite directions, so a sacrificing ratio is always the opposite (reverse) of a gaining r …

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Part (a)

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