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

Answer and explanation

Correct answer: 19:31

C’s old share is 3/10. A acquires 3/5 of C’s share, which is 9/50, while B acquires 2/5, which is 6/50. A’s new share is 2/10 + 9/50 = 10/50 + 9/50 = 19/50, and B’s new share is 5/10 + 6/50 = 25/50 + 6/50 = 31/50. Therefore, the new ratio is 19:31. Exam tip: Divide the retiring partner’s share according to the gaining ratio and add the gains to the old shares.

Related tags

New RatioRetirement Of PartnerGaining RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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