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In the new profit-sharing ratio of 3:1:1, the third partner is the incoming partner. What will be the incoming partner’s share of the total profit?

Answer and explanation

Correct answer: \(\frac{1}{5}\)

The sum of the terms in the new ratio 3:1:1 is 5. The third partner’s term is 1, so his share of the total profit is \(\frac{1}{3+1+1}=\frac{1}{5}\). \(\frac{1}{3}\) is incorrect because the share is calculated using the total of the ratio terms, not the number of partners. Exam tip: A partner’s profit share equals his ratio term divided by the sum of all ratio terms.

Related tags

New RatioIncoming PartnerProfit Sharing RatioGoodwill AccountingPartnership AccountsReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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