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A, B and C share profits in the ratio 3:3:2. D is admitted for a 1/8 share of the total profits. D’s share is acquired equally from A and B, with 1/16 taken from each. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: A : B : C : D = 5:5:4:2

The original ratio 3:3:2 has a total of 8 parts, so A and B each have 3/8 and C has 2/8. Since D’s 1/8 share is taken equally from A and B, subtract 1/16 from each: A = 3/8 − 1/16 = 5/16, B = 5/16, C = 2/8 = 4/16, and D = 1/8 = 2/16. Therefore, the new ratio is 5:5:4:2. Exam tip: reduce the shares only of those existing partners who sacrifice a portion for the incoming partner.

Related tags

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

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