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A, B and C share profits in the ratio 4:1:5. When C retires, the new profit-sharing ratio of A and B becomes 3:2. Which of the following statements is correct?

Answer and explanation

Correct answer: Both A and B gained a share

Under the old ratio 4:1:5, A’s share was 4/10 and B’s share was 1/10. Under the new ratio 3:2, A’s share becomes 3/5 = 6/10 and B’s share becomes 2/5 = 4/10. Thus, both A and B gained a share. Exam tip: In retirement questions, convert the old and new ratios into fractions and compare each continuing partner’s share.

Related tags

Partnership AccountsPartner RetirementNew RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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