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The old ratio is 4:2:1 and the new ratio is 3:2:1:1. From which old partner did the new partner's share come?

Answer and explanation

Correct answer: Only from the first partner

The governing concept is sacrifice: an old partner sacrifices the difference between the old share and the new share. The old shares are 4/7, 2/7 and 1/7. In the new ratio 3:2:1:1, the first three shares are 3/7, 2/7 and 1/7, while the incoming partner receives 1/7. Thus, the first partner sacrifices 4/7 − 3/7 = 1/7. The second partner sacrifices 2/7 − 2/7 = 0, and the third sacrifices 1/7 − 1/7 = 0. Therefore the entire incoming partner's share has come only from the first partner. Options B, C and D incorrectly assume that one or more other partners also reduced their shares.

Related tags

New Profit Sharing RatioSacrificing RatioAdmission Of PartnerReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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