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The old profit-sharing ratio of A, B and C is 2:4:4. When C retires, the new profit-sharing ratio of A and B becomes 1:2. What is the correct gaining ratio of A and B?

Answer and explanation

Correct answer: 1:2

The total of the old ratio 2:4:4 is 10, so A and B’s old shares are 1/5 and 2/5 respectively. Under the new ratio 1:2, their shares become 1/3 and 2/3. Therefore, A’s gain is 1/3 − 1/5 = 2/15 and B’s gain is 2/3 − 2/5 = 4/15. Hence, the gaining ratio is 2/15:4/15 = 1:2. Exam tip: gaining ratio is calculated as new share minus old share.

Related tags

Partnership AccountsGaining RatioRetirement Of PartnerNew Profit Sharing RatioAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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