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A, B, C and D share profits in the old ratio 6:3:3:2. When B retires, the new profit-sharing ratio of A, C and D becomes 5:4:5. Which partner sacrifices a share of profit?

Answer and explanation

Correct answer: A

The total of the old ratio is 14. A’s old share is \(6/14\), while the new share is \(5/14\). Sacrifice = old share − new share = \(6/14-5/14=1/14\). Therefore, A is the sacrificing partner. C’s share increases from \(3/14\) to \(4/14\), and D’s share increases from \(2/14\) to \(5/14\), so both gain. Exam tip: a partner sacrifices when the old share is greater than the new share.

Related tags

Goodwill-SettlementSacrificing-RatioRetirement-Of-PartnerProfit-Sharing-RatioPartnership-AccountingGoodwill SettlementReconstitution Retirement Or Death Of A PartnerAccountancy

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