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A and B share profits in the ratio 1:4. C is admitted as a partner for a 1/5 share of profits. If C’s share is taken from the old partners in their old ratio, what will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 4:16:5

C receives 1/5 of the profits, so the remaining share for A and B is 4/5. A’s new share is \((4/5)\times(1/5)=4/25\), and B’s new share is \((4/5)\times(4/5)=16/25\). C’s share is \(1/5=5/25\). Therefore, the new ratio is 4:16:5. Option B is incorrect because it does not reduce the old partners’ shares proportionately. Exam tip: First find the remaining profit, then distribute it among the old partners in their old ratio.

Related tags

New Profit Sharing RatioAdmission Of PartnerRemaining ProfitPartnership AccountingReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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