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A, B and C share profits in the ratio 4:4:2. C retires. In the absence of a new agreement, what will be the new profit-sharing ratio of A and B?

Answer and explanation

Correct answer: 1:1

When there is no new agreement, the remaining partners, A and B, share the retiring partner C’s share in their old ratio. Therefore, their ratio remains 4:4, which simplifies to 1:1. The ratio 2:1 is incorrect because 4:4 simplifies equally for both partners. Exam tip: In the absence of a new agreement, the continuing partners retain their old mutual profit-sharing ratio.

Related tags

Retirement Of PartnerNew Profit Sharing RatioPartnership AccountsOld RatioNo AgreementNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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