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A, B and C are partners sharing profits in the ratio 4:5:1. C retires, and the new profit-sharing ratio of A and B becomes 1:1. Which of the following statements is correct?

Answer and explanation

Correct answer: Only A gained a share

Before C’s retirement, A’s share was 4/10 and B’s share was 5/10. Under the new 1:1 ratio, each partner receives 1/2, or 5/10. Therefore, A gains 5/10 − 4/10 = 1/10, while B’s share remains unchanged at 5/10. Hence, only A gained a share. Exam tip: Convert both the old and new ratios into fractions of the total profit before comparing them.

Related tags

New RatioRetirement Of PartnerGaining ShareProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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