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A, B and C share profits in the ratio 5:4:1. C retires, and the new profit-sharing ratio of A and B is 3:2. Which statement is correct?

Answer and explanation

Correct answer: A gained a share, while B's share did not decrease

The governing concept is comparison of old and new profit-sharing fractions. The old total is 5 + 4 + 1 = 10, so A originally had 5/10 and B had 4/10. After C retires, A's new share is 3/5, which is 6/10, so A gains 1/10. B's new share is 2/5, which is 4/10, exactly equal to his old share. Thus A alone receives the released share of C, while B neither gains nor loses. Option B is wrong because B does not gain, option C is wrong because the gains are unequal, and option D ignores A's increase. Therefore, option A is correct.

Related tags

New RatioGaining RatioRetirement Of PartnerNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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