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A, B and C share profits in the ratio 5:4:1. When C retires, A and B adopt a new profit-sharing ratio of 3:2. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 1:0

Before C’s retirement, A’s share was 5/10 and B’s share was 4/10. Under the new ratio of 3:2, A’s share becomes 3/5 = 6/10 and B’s share becomes 2/5 = 4/10. Thus, A’s gain is 6/10 − 5/10 = 1/10, while B’s gain is 4/10 − 4/10 = 0. Therefore, the gaining ratio is 1/10 : 0 = 1:0. B does not gain because his share remains unchanged. Exam tip: Gaining ratio = New share − Old share.

Related tags

GoodwillRetirementGaining RatioPartnership AccountsProfit Sharing RatioPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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