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

Answer and explanation

Correct answer: 11:9

C’s old profit share is 5/10. Since A and B acquire it equally, each receives half of 5/10, which is 5/20. Therefore, A’s new share is 3/10 + 5/20 = 11/20, while B’s new share is 2/10 + 5/20 = 9/20. Hence, the new ratio is 11:9. Option 3:2 is only A and B’s old ratio and ignores the redistribution of C’s share. Exam tip: Add each acquiring partner’s gain from the retiring partner’s share to their original share.

Related tags

Partner RetirementNew RatioEqual GainProfit Sharing RatioAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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