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A, B and C share profits in the ratio 4:1:5. C retires, and the new profit-sharing ratio of A and B becomes 3:2. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 2:3

Under the old ratio, A’s share was 4/10 and B’s share was 1/10. Under the new ratio 3:2, A’s share becomes 6/10 and B’s share becomes 4/10. Therefore, A’s gain is 6/10 − 4/10 = 2/10, while B’s gain is 4/10 − 1/10 = 3/10. Hence, the gaining ratio is 2:3. The ratio 3:2 is the new ratio, not the gaining ratio. Exam tip: Calculate each partner’s gain by subtracting the old share from the new share.

Related tags

Gaining RatioPartner RetirementNew RatioPartnership AccountsProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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