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Three old partners A, B and C share profits in the ratio 2:2:1. D is admitted for a 1/5 share of profits. A and B sacrifice D’s entire share equally, while C makes no sacrifice. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: A : B : C : D = 3 : 3 : 2 : 2

The old shares are A = 2/5, B = 2/5 and C = 1/5. D receives 1/5, which is sacrificed equally by A and B; therefore, each sacrifices 1/10. The new shares are A = 2/5 − 1/10 = 3/10, B = 3/10, C = 1/5 = 2/10 and D = 1/5 = 2/10. Hence, the new ratio is 3:3:2:2. Option B incorrectly retains A’s and B’s old shares without deducting their sacrifice. Exam tip: Deduct the incoming partner’s share only from the partners who actually sacrifice it.

Related tags

Admission Of PartnerNew Profit Sharing RatioSacrificing RatioPartnership AccountsClass 12Reconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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