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A, B and C share profits in the ratio 5:4:3. B retires, and A and C acquire B’s share in the ratio 2:1. What will be the new profit-sharing ratio of A and C?

Answer and explanation

Correct answer: 23:13

The total initial share is 12, so B’s share is 4/12. Since A and C acquire it in the ratio 2:1, A receives 8/36 and C receives 4/36. Therefore, A’s new share is 15/36 + 8/36 = 23/36, while C’s new share is 9/36 + 4/36 = 13/36. Hence, the new ratio is 23:13. Exam tip: Divide the retiring partner’s share according to the acquisition ratio and add each gain to the partner’s old share.

Related tags

New RatioRetirement Of PartnerAcquisition RatioProfit Sharing RatioPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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