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A, B and C share profits in the ratio 5:2:3. C retires, and the new profit-sharing ratio of A and B becomes 3:2. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 1:2

Under the old ratio 5:2:3, A’s share is 5/10 and B’s share is 2/10. Under the new ratio 3:2, A’s share becomes 3/5 = 6/10 and B’s share becomes 2/5 = 4/10. Therefore, A’s gain is 6/10 − 5/10 = 1/10, while B’s gain is 4/10 − 2/10 = 2/10. Hence, the gaining ratio is 1/10 : 2/10 = 1:2. Exam tip: To find the gaining ratio, subtract each continuing partner’s old share from their new share.

Related tags

Gaining RatioNew RatioPartner RetirementPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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