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Partner A's old profit-sharing ratio is 1/2 and the new profit-sharing ratio is 2/5. What is A's sacrifice ratio?

Answer and explanation

Correct answer: 1/10

Sacrifice ratio = old share − new share. Therefore, A's sacrifice = 1/2 − 2/5 = 5/10 − 4/10 = 1/10. The option 1/5 results from the common mistake of subtracting fractions without first taking a common denominator. Exam tip: convert the fractions to a common denominator before subtracting.

Related tags

Goodwill AccountingSacrifice RatioPartner AdmissionFraction CalculationReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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