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A, B and C share profits in the ratio 5:3:2. C retires, and the new profit-sharing ratio of A and B becomes 3:2. What is the correct gaining ratio of A and B?

Answer and explanation

Correct answer: 1:1

Under the old ratio, A’s share was 5/10 and B’s share was 3/10. Under the new ratio 3:2, A’s share becomes 6/10 and B’s share becomes 4/10. Thus, A’s gain is 6/10 − 5/10 = 1/10 and B’s gain is 4/10 − 3/10 = 1/10. Therefore, their gaining ratio is 1:1. Exam tip: Gaining ratio = New share − Old share for each continuing partner.

Related tags

Partnership AccountsRetirement Of PartnerGaining RatioNew Profit Sharing RatioClass 12 AccountancyNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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