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A, B and C share profits in the ratio 1:2:3. D is admitted for a 1/6 share of the profits. D’s share is contributed by B and C in the ratio 1:2, while A contributes nothing. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 3:5:7:3

D’s 1/6 share is taken from B and C in the ratio 1:2. Therefore, B’s sacrifice is 1/6 × 1/3 = 1/18, and C’s sacrifice is 1/6 × 2/3 = 1/9. Expressing the old ratio in eighteenths gives A = 3/18, B = 6/18 and C = 9/18. The new shares are A = 3/18, B = 5/18, C = 7/18 and D = 3/18. Hence, the new ratio is 3:5:7:3. Exam tip: Deduct the incoming partner’s share from the old partners according to their sacrifice ratio.

Related tags

AccountancyPartner AdmissionNew Profit Sharing RatioSacrifice RatioPartnership AccountsReconstitution Admission Of A PartnerClass 12 Mcq

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