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If an old partner's new share is more than his old share, what is it called?

Answer and explanation

Correct answer: Gain

The direct answer is A: it is called gain. In partnership reconstitution, compare an old partner’s new profit share with the old share. If the new share is larger, the partner has received an additional portion from another partner; this increase is called gain. Option A is correct. Option B, sacrifice, means the opposite: the new share is smaller than the old share. Option C, goodwill premium, is money or value connected with goodwill and is not the name for an increase in a partner’s profit share. Option D, drawings, means withdrawals made by a partner for personal use and has no connection with this comparison. A gaining partner may compensate the sacrificing partner for the benefit received; the statement does not describe drawings. Memory cue: new share minus old share = gain; old share minus new share = sacrifice.

Related tags

Gain RatioAdmissionGoodwill

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