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A and B share profits in the ratio 7:3. C receives a 1/10 share from A and B in the sacrificing ratio 1:4. What is the new profit-sharing ratio?

Answer and explanation

Correct answer: 34:7:5

The governing rule is that each existing partner’s sacrifice equals the incoming partner’s share multiplied by that partner’s fraction in the sacrificing ratio. C’s share is 1/10. Since A and B sacrifice in 1:4, A sacrifices 1/10 × 1/5 = 1/50 and B sacrifices 1/10 × 4/5 = 4/50 = 2/25. A’s old share is 7/10 = 35/50, so A’s new share is 34/50. B’s old share is 3/10 = 15/50, so B’s new share is 11/50; C has 5/50. Thus the ratio is 34:11:5. Therefore the supplied option set needs correction: none of the original options is correct.

Related tags

Sacrificing RatioNew RatioAdmissionPartnership AccountsNew Profit Sharing RatioReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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