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A, B and C share profits in the ratio 4:2:4. C retires, and A and B acquire his share in the ratio 1:3. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 5:5

C’s old share was 4 parts, and it was acquired by A and B in the ratio 1:3. Thus, A receives 1 additional part and B receives 3 additional parts. The new ratio is A:B = (4+1):(2+3) = 5:5. The ratio 1:3 represents only the acquisition of C’s share, not the new profit-sharing ratio. Exam tip: Add each partner’s acquired share to their original share to find the new ratio.

Related tags

Partnership AccountsNew RatioRetirement Of PartnerProfit Sharing RatioAcquisition Of ShareNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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