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A, B and C share profits in the ratio 6:1:3. A retires, and B and C acquire his share in the ratio 1:5. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 1:4

A’s share is 6 out of the total 10 parts, i.e. \(6/10\). B acquires \(1/6\) of A’s share, which is \(1/10\), while C acquires \(5/6\), which is \(5/10\). Thus, B’s new share is \(1/10+1/10=2/10\), and C’s new share is \(3/10+5/10=8/10\). Therefore, the new ratio is \(2:8=1:4\). The ratio 1:5 is only the gaining ratio, not the new profit-sharing ratio. Exam tip: first convert the old ratio into fractional shares, then distribute the retiring partner’s share.

Related tags

Partnership AccountsRetirement Of PartnerNew RatioGaining RatioProfit SharingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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