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A and B share profits in the ratio 5:11. C is admitted for a 1/4 share of the total profit, which is sacrificed by A and B in the ratio 1:4. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 21:39:20

The old total ratio of A and B is 5+11=16, so their old shares are 5/16 and 11/16. To give C a 1/4 share, A sacrifices 1/20 and B sacrifices 1/5 because the sacrificing ratio is 1:4. Thus, A’s new share is 5/16−1/20=21/80, and B’s new share is 11/16−1/5=39/80. C’s share is 1/4=20/80. Therefore, the new ratio is 21:39:20. Option C incorrectly distributes the sacrificed share; the sacrifice must be deducted from the old shares in the stated ratio. Exam tip: subtract each old partner’s sacrifice from their old share before forming the new ratio.

Related tags

New Profit Sharing RatioSacrificing RatioAdmission Of PartnerPartnership AccountsReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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