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A and B share profits in the ratio 3:5. C is admitted for a 1/4 share of the total profits, which is sacrificed by A and B in the ratio 1:3. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 5:7:4

A’s old share is 3/8 and B’s old share is 5/8. C’s 1/4 share is contributed by A and B in the sacrificing ratio 1:3; therefore, A sacrifices 1/16 and B sacrifices 3/16. Thus, A’s new share is 3/8 − 1/16 = 5/16, B’s new share is 5/8 − 3/16 = 7/16, and C’s share is 1/4 = 4/16. Hence, the new profit-sharing ratio is 5:7:4. Exam tip: Convert the old ratio into fractions first, then distribute the incoming partner’s share according to the sacrificing ratio and subtract it. Option B fails to make this proper sacrifice adjustment.

Related tags

AccountancyPartner AdmissionSacrificing RatioNew Profit Sharing RatioPartnership AccountsReconstitution Admission Of A PartnerClass 12 Mcq

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