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A, B and C share profits in the ratio 1:4:5. B dies, and A and C acquire B’s profit share equally. What will be the new profit-sharing ratio of A and C?

Answer and explanation

Correct answer: 3:7

The total ratio is 10, so B’s profit share is \(4/10\). This share is acquired equally by A and C, giving each \(2/10\). A’s new share is \(1/10+2/10=3/10\), while C’s new share is \(5/10+2/10=7/10\). Therefore, the new ratio is 3:7. Exam tip: Divide the outgoing partner’s share according to the stated acquisition ratio and add each gain to the partner’s original share.

Related tags

Partnership AccountsRetirement Or Death Of PartnerNew Profit Sharing RatioGaining RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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