Mnemonic Device:

• NO GAINS ON SACRIFICE

Explanation: to remember a Formula for Gain Ratio and Sacrifice Ratio.

• Gain Ratio = New Ratio – Old Ratio Sacrifice Ratio = Old Ratio – New Ratio
  • This formula is useful in the application of Profit Sharing Ratio in case of a partnership firm. When a new partner is admitted into the business then the old profit-sharing is no longer valid and a new profit-sharing ratio is required. Besides bringing capital into the business, the new partner is also supposed to bring some additional funds as a gift for the old partners. This gift is called Goodwill. So when the new partner brings Goodwill into the business, this amount is supposed to be distributed to the old partners in Sacrifice Ratio. The formula for Sacrifice Ratio being Old Ratio – New Ratio. Similarly, when any partners retire from the partnership firm the outgoing partner is supposed to get his share in the Goodwill of the partnership firm. In this case, the remaining partners, those who continue to be in the business and do not retire, are supposed to contribute Goodwill for the retiring partner. This contribution is the Gain Ratio, which is calculated as New Ratio – Old Ratio.
• This Slogan or Proverb is also applicable for all Parents who sacrifice for their Children without expecting any Gains for their sacrifices.