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The profit-sharing ratio of three old partners is 2:3:5. A new partner is admitted for a \(1/4\) share of the total profits, which is surrendered by the old partners in the ratio 1:2:2. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: (3:4:8:5)

The old partners’ shares are \(1/5, 3/10, 1/2\). The new partner’s \(1/4\) share is surrendered in the ratio 1:2:2, so the sacrifices are \(1/20, 1/10, 1/10\), respectively. Thus, the old partners’ new shares are \(1/5-1/20=3/20\), \(3/10-1/10=1/5\), and \(1/2-1/10=2/5\). The new partner retains \(1/4\). Multiplying all shares by 20 gives the ratio 3:4:8:5. Option B results from assuming equal sacrifice, so it is incorrect. Exam tip: Convert the old ratio into fractions first, then distribute the incoming partner’s share according to the sacrificing ratio.

Related tags

Sacrificing RatioOld Profit Sharing RatioNew Partner AdmissionNew Profit Sharing RatioPartnership AccountsReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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