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A, B and C share profits in the ratio 2 : 3 : 1. A dies, and no new agreement is made. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 3 : 1

In the absence of a new agreement, the continuing partners, B and C, share profits in the same relative ratio as before. Their old shares were 3 and 1 respectively, so their new ratio is 3 : 1. A’s share of 2 ceases; it is not automatically divided equally between B and C. Exam tip: After a partner’s retirement or death, use the old ratio for the continuing partners when no new agreement is given.

Related tags

Death Of PartnerNo New AgreementNew RatioProfit Sharing RatioPartnership AccountingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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