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Arun and Varun share profits in the ratio 5:5. Tarun is admitted as a partner for a 1/5 share of profits. If Tarun’s share is acquired as 3/20 from Arun and 1/20 from Varun, what will be the new profit-sharing ratio?

Answer and explanation

Correct answer: Arun : Varun : Tarun = 7 : 9 : 4

Since Arun and Varun originally shared profits in the ratio 5:5, each had a share of 1/2. Arun’s new share = 1/2 − 3/20 = 7/20, while Varun’s new share = 1/2 − 1/20 = 9/20. Tarun’s share is 1/5 = 4/20. Therefore, the new ratio is 7/20 : 9/20 : 4/20 = 7:9:4. Option C is incorrect because Arun and Varun have surrendered different portions, so their new shares cannot remain equal. Exam tip: Subtract each partner’s surrendered share from the old share and express all resulting shares with a common denominator.

Related tags

Admission Of A PartnerNew Profit Sharing RatioProfit Sharing RatioSurrendered ShareClass 12 AccountancyReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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