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A, B and C share profits in the ratio 7:2:1. B retires, and A alone acquires B’s entire share of profit. What will be the new profit-sharing ratio of A and C?

Answer and explanation

Correct answer: 9:1

A’s old share is 7 and B’s share is 2. On B’s retirement, A acquires B’s entire share, so A’s new share becomes 7 + 2 = 9. C’s share remains 1. Therefore, the new ratio of A and C is 9:1. Exam tip: When one partner acquires another partner’s entire share, add the acquired share to the acquiring partner’s old share. 7:3 is incorrect because B’s share has not been added correctly to A’s share.

Related tags

Retirement Of PartnerNew Profit Sharing RatioGaining RatioPartnership AccountsClass 12 AccountancyNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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