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A, B and C share profits in the ratio 4:5:3. B dies, and A and C acquire B’s share in the ratio 2:3. What will be the new profit-sharing ratio of A and C?

Answer and explanation

Correct answer: 1:1

The sum of the old ratio is 12, so B’s share is \(5/12\). A acquires \(2/5\) of B’s share, which is \(2/12\), while C acquires \(3/5\), which is \(3/12\). Thus, A’s new share is \(4/12+2/12=6/12\), and C’s new share is \(3/12+3/12=6/12\). Therefore, the new ratio is \(6:6=1:1\). The ratio 4:3 ignores the addition of B’s share. Exam tip: Divide the deceased partner’s share according to the acquisition ratio and add the resulting portions to the continuing partners’ old shares.

Related tags

Partnership AccountsDeath Of PartnerNew Profit Sharing RatioAcquisition RatioReconstitutionNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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