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A, B and C share profits in the ratio 2 : 5 : 3. After B retires, if no new profit-sharing agreement is made, in what ratio will A and C share the profits?

Answer and explanation

Correct answer: 2 : 3

In the absence of a new agreement, the retiring partner’s share is acquired by the continuing partners in their old profit-sharing ratio. Therefore, A and C continue to share profits in their old ratio of 2 : 3. Even B’s 5 parts are distributed between A and C in the ratio 2 : 3, so their resulting ratio remains 2 : 3. Hence, option A is correct. Exam tip: For retirement questions, first check whether a new ratio has been agreed upon; if not, use the continuing partners’ old ratio.

Related tags

Partnership AccountsPartner RetirementNew Profit Sharing RatioContinuing PartnersAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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