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A and B share profits in the old ratio of 7:5 and the new ratio of 3:2. Due to this change, which partner sacrifices and what is the amount of sacrifice?

Answer and explanation

Correct answer: B (1/60)

Under the old ratio, B’s share was 5/12, while under the new ratio it is 2/5. Therefore, B’s sacrifice = 5/12 − 2/5 = (25 − 24)/60 = 1/60. A’s share increases from 7/12 to 3/5, so A gains rather than sacrifices. Option C is incorrect because 1/12 is not the difference between B’s old and new shares. Exam tip: Calculate sacrifice as old share minus new share.

Related tags

Partnership AccountsGoodwillSacrificing RatioChange In Profit Sharing RatioPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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