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A, B and C share profits in the ratio 4:3:2. After B retires, A and C share future profits in the ratio 5:4. What is the gaining ratio of A and C?

Answer and explanation

Correct answer: 1:2

Under the old ratio, A’s share was 4/9 and C’s share was 2/9. Under the new ratio, A’s share becomes 5/9 and C’s share becomes 4/9. Therefore, A’s gain is 5/9 − 4/9 = 1/9, while C’s gain is 4/9 − 2/9 = 2/9. Hence, the gaining ratio is 1/9:2/9 = 1:2. Exam tip: calculate each partner’s gain as new share minus old share; do not use the new ratio directly.

Related tags

Partnership AccountsGoodwillRetirementGaining RatioProfit SharingPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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