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A and B’s old profit-sharing ratio is 8:7 and their new profit-sharing ratio is 3:2. Due to this change, which partner sacrifices and what is the amount of sacrifice?

Answer and explanation

Correct answer: B — 1/15

B’s old share was 7/15, while his new share is 2/5 = 6/15. Thus, B’s share decreases by 7/15 − 6/15 = 1/15, so B sacrifices 1/15. In contrast, A’s share increases from 8/15 to 3/5 = 9/15, giving A a gain of 1/15. Exam tip: calculate sacrifice by subtracting the new share from the old share.

Related tags

GoodwillSacrifice RatioProfit Sharing RatioPartnership AccountsChange In RatioPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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