Question 91 markMCQSection A

Dharam, Karam and Raman were partners in a firm sharing profits and losses in the ratio of 7 : 8 : 5. On 31st March, 2025, Raman retired from the firm. Dharam and Karam decided to share profits in future in the ratio of 11 : 9. Their gaining ratio will be : OR Deen, Raju and Hari were partners in a firm sharing profit and losses in the ratio of 7 : 6 : 7. On 31st March, 2025 Raju died. Deen and Hari decided to take over Raju's share equally. The new profit sharing ratio between Deen and Hari will be :

Reconstitution of a Partnership Firm: Retirement/Death of a Partner
Gaining Ratio on Retirement/Death of a Partner

Options

(A)1 : 1
(B)1 : 2
(C)4 : 1
(D)2 : 1

Official answer

Correct option: (C) 4 : 1


Gaining Ratio = New Share − Old Share. Dharam gains 11/20−7/20=4/20 and Karam gains 9/20−8/20=1/20\text{Dharam gains } 11/20 - 7/20 = 4/20 \text{ and Karam gains } 9/20 - 8/20 = 1/20, giving a gaining ratio of 4 : 1.

Answer keywords:gaining ratioretirement of a partnerdeath of a partnernew profit sharing ratioold profit sharing ratioreconstitution of partnershipsacrificing partner

Marking scheme

  1. 1.1 mark for correctly selecting option (C) 4 : 1 with the gaining ratio computed as New Share−Old Share\text{New Share} - \text{Old Share} for Dharam and Karam.
  2. 2.If the OR alternative (death of Raju) is attempted instead, 1 mark for correctly selecting 1 : 1 as the new ratio between Deen and Hari.

Hint

Gaining Ratio=New Share−Old Share\text{Gaining Ratio} = \text{New Share} - \text{Old Share} for each continuing partner; do not confuse it with the new profit-sharing ratio itself.

Quick oral answer

Gaining ratio is the ratio in which continuing partners acquire the outgoing partner's share of profit; it is found by subtracting each partner's old share from their new share.

Common mistakes

  1. 1.Confusing gaining ratio with the new profit-sharing ratio itself instead of computing New Share − Old Share.
  2. 2.Forgetting to convert all shares to a common denominator before subtracting.
  3. 3.Assuming the gain is shared equally without actually calculating each partner's individual gain.

Analysis and explanation

Concept


When a partner retires or dies, the continuing partners usually gain a share of profit at the retiring/deceased partner's expense. The Gaining Ratio = New Profit Share − Old Profit Share for each continuing partner, and it is used to distribute the retiring/deceased partner's share of goodwill among the gainers.


Working (Part a)


Old ratio of Dharam : Karam : Raman = 7 : 8 : 5 (out of 20).


  • Dharam’s old share=7/20;new share=11/20→gain=4/20\text{Dharam's old share} = 7/20; \text{new share} = 11/20 \to \text{gain} = 4/20
  • Karam’s old share=8/20;new share=9/20→gain=1/20\text{Karam's old share} = 8/20; \text{new share} = 9/20 \to \text{gain} = 1/20

Gaining ratio=4/20:1/20=\text{Gaining ratio} = 4/20 : 1/20 = 4 : 1, so option (C) is correct.


Why the other options are wrong


  • (A) 1:1 would be true only if both partners gained equally, which is not the case here.
  • (B) 1:2 reverses the ratio incorrectly.
  • (D) 2:1 does not match the actual computed gain of 4:1.

OR part (b) — for reference


Deen, Raju and Hari share 7 : 6 : 7 (out of 20). Raju (6/20) dies and Deen and Hari take his share equally, i.e. 3/20 each.


  • Deen’s new share=7/20+3/20=10/20\text{Deen's new share} = 7/20 + 3/20 = 10/20
  • Hari’s new share=7/20+3/20=10/20\text{Hari's new share} = 7/20 + 3/20 = 10/20

New ratio Deen : Hari=\text{New ratio Deen : Hari} = 1 : 1 (option A of the OR part).

Interesting facts

Section 37 of the Indian Partnership Act, 1932 entitles an outgoing partner (or their estate) to interest at 6% p.a. on the amount due if it is not settled immediately, or to a share of subsequent profits attributable to the use of their capital — the same Act that underlies gaining-ratio adjustments.

Gaining ratio calculations became a fixture of CBSE Class 12 Accountancy board papers after the retirement/death chapter was substantially expanded in the NCERT syllabus, reflecting the real-world frequency of partner exits in Indian family-run partnership firms.

Question details

Q9 of 39 questions

Board
CBSE
Class
Class 12
Subject
Accountancy
Year
2026
Section
Section A
Marks
1
Type
MCQ
Chapter
Reconstitution of a Partnership Firm: Retirement/Death of a Partner
Topic
Gaining Ratio on Retirement/Death of a Partner
Bloom's level
apply
Syllabus topic
Unit 1: Accounting for Partnership Firms — Reconstitution: Retirement/Death of a Partner — Gaining Ratio
Author
CBSE
Reviewed by
Padhantu Academic Team

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Frequently asked questions

What is the formula for gaining ratio?

Gaining Ratio=New Profit Share−Old Profit Share\text{Gaining Ratio} = \text{New Profit Share} - \text{Old Profit Share}, calculated separately for each continuing partner. A positive value means the partner has gained; a negative value would mean a sacrifice.

Why is gaining ratio important on a partner's retirement or death?

It is the ratio in which the continuing partners bear the retiring/deceased partner's share of goodwill, since they are the ones who gain that share of future profits.