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A’s old profit-sharing share is \(\frac{1}{2}\) and B’s old share is \(\frac{1}{3}\). After C’s retirement, A and B agree to share profits in the new ratio 3:2. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 3:2

Under the new ratio, A’s share is \(\frac{3}{5}\) and B’s share is \(\frac{2}{5}\). A’s gain is \(\frac{3}{5}-\frac{1}{2}=\frac{1}{10}\), while B’s gain is \(\frac{2}{5}-\frac{1}{3}=\frac{1}{15}\). Therefore, the gaining ratio is \(\frac{1}{10}:\frac{1}{15}=3:2\), so option A is correct. Exam tip: Gaining ratio is calculated as new share minus old share for each gaining partner.

Related tags

AccountancyGaining RatioGoodwillPartner RetirementProfit Sharing RatioGoodwill SettlementReconstitution Retirement Or Death Of A PartnerClass 12 Mcq

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