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A, B and C share profits and losses in the ratio 8:1:1. A dies, and B and C acquire A’s share in their old mutual ratio. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 1:1

A’s share is 8/10, while B’s and C’s old shares are 1/10 each. B and C acquire A’s 8/10 share in their old mutual ratio of 1:1, so each receives an additional 4/10. Their new shares become 5/10 and 5/10, which simplify to 1:1. Exam tip: When the remaining partners acquire the outgoing partner’s share in their old mutual ratio, their new mutual ratio remains unchanged.

Related tags

Partnership AccountsDeath Of PartnerOld Mutual RatioNew Profit Sharing RatioReconstitutionNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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