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The new profit-sharing shares of two old partners are 1/2 and 1/4, respectively. The new partner receives 1/4 of the total profit, and the old partners’ former ratio was 3:2. What is the sacrificing ratio of the old partners?

Answer and explanation

Correct answer: 2:3

From the old ratio 3:2, the old partners’ former shares were 3/5 and 2/5. The first partner’s sacrifice is 3/5 − 1/2 = 1/10, while the second partner’s sacrifice is 2/5 − 1/4 = 3/20. Thus, the sacrificing ratio is 1/10 : 3/20 = 2:3. Exam tip: calculate each partner’s sacrifice as old share minus new share; do not use the incoming partner’s share alone to determine the ratio.

Related tags

New Profit-Sharing RatioSacrificing RatioGoodwill AccountingAdmission Of A PartnerPartnership AccountsReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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