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A and B have an old profit-sharing ratio of 3:2. Their new ratio is 2:1. Who has sacrificed?

Answer and explanation

Correct answer: B sacrificed

To identify sacrifice, compare each partner’s old fraction with the corresponding new fraction. Under the old ratio 3:2, A’s share was 3/5 and B’s share was 2/5. Under the new ratio 2:1, A’s share becomes 2/3 and B’s share becomes 1/3. A’s share rises from 3/5 to 2/3, so A gains. B’s share falls from 2/5 to 1/3, so B gives up part of the former share. Therefore B is the sacrificing partner. The conclusion is not based on the ratio numerals alone; the fractions must be compared. Hence option A is correct.

Related tags

GoodwillSacrificing RatioProfit SharingAdmissionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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