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A, B and C share profits in the ratio 3:4:5. After C retires, the new profit-sharing ratio of A and B becomes 5:4. What is B’s gaining ratio?

Answer and explanation

Correct answer: 1/9

B’s old profit share was \(\frac{4}{3+4+5}=\frac{4}{12}=\frac{1}{3}\). After C’s retirement, B’s new share is \(\frac{4}{5+4}=\frac{4}{9}\). Therefore, B’s gaining ratio = new share − old share = \(\frac{4}{9}-\frac{1}{3}=\frac{4}{9}-\frac{3}{9}=\frac{1}{9}\). The value \(\frac{4}{9}\) is B’s new share, not the gaining ratio. Exam tip: Calculate a partner’s gaining ratio by subtracting the old share from the new share.

Related tags

Gaining RatioRetirement Of PartnerNew Profit Sharing RatioPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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