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A and B share profits in the ratio 3:7. C is admitted for a \(\frac{1}{5}\) share of profits. A and B sacrifice this \(\frac{1}{5}\) share in the ratio 1:3. What will be A’s new profit-sharing share after the sacrifice?

Answer and explanation

Correct answer: It will decrease to \(\frac{1}{4}\)

A’s old share is \(\frac{3}{3+7}=\frac{3}{10}\). Since A and B sacrifice C’s \(\frac{1}{5}\) share in the ratio 1:3, A’s sacrifice is \(\frac{1}{5}\times\frac{1}{1+3}=\frac{1}{20}\). Therefore, A’s new share is \(\frac{3}{10}-\frac{1}{20}=\frac{6}{20}-\frac{1}{20}=\frac{1}{4}\). Thus, A’s share decreases to \(\frac{1}{4}\). Option D is incorrect because it treats the entire sacrificed share as A’s sacrifice, whereas A sacrifices only one-fourth of it. Exam tip: Subtract the sacrificing partner’s share of the incoming partner’s share from the old share.

Related tags

AccountancyAdmission-Of-PartnerNew-Profit-Sharing-RatioSacrificing-RatioPartnership-AccountsNew Profit Sharing RatioReconstitution Admission Of A PartnerClass 12 Mcq

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