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

Answer and explanation

Correct answer: A gained a larger share than B

Under the old ratio, A’s share was 2/10 and B’s share was 3/10. In the new 1:1 ratio, each partner receives 1/2, or 5/10. Therefore, A’s gain is 5/10 − 2/10 = 3/10, while B’s gain is 5/10 − 3/10 = 2/10. Hence, A gained more than B. Exam tip: To compare gains on retirement, subtract each partner’s old share from the corresponding new share.

Related tags

New RatioRetirement Of PartnerGaining RatioShare ComparisonPartnership AccountingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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