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A, B and C share profits in the ratio 5:2:3. C retires, and A and B acquire C’s share in the ratio 1:2. What will be the new profit-sharing ratio of A and B?

Answer and explanation

Correct answer: 3:2

C’s original share is 3/10. A and B acquire this share in the ratio 1:2, so A gains 1/10 and B gains 2/10. Therefore, A’s new share is 5/10 + 1/10 = 6/10, while B’s new share is 2/10 + 2/10 = 4/10. Thus, the new ratio is 6:4, which simplifies to 3:2. Exam tip: Convert the old ratio into fractions, calculate the retiring partner’s share, and distribute it according to the gaining ratio.

Related tags

Partnership AccountsRetirement Of PartnerNew Profit Sharing RatioGaining RatioAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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