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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 the gaining ratio of A and B?

Answer and explanation

Correct answer: 11:4

Under the old ratio, A’s share was 3/12 = 1/4 and B’s share was 4/12 = 1/3. Under the new ratio, A’s share is 5/9 and B’s share is 4/9. Therefore, A’s gain = 5/9 − 1/4 = 11/36, while B’s gain = 4/9 − 1/3 = 1/9 = 4/36. Hence, the gaining ratio is 11/36 : 4/36 = 11:4. The ratio 5:4 is the new profit-sharing ratio, not the gaining ratio. Exam tip: To find the gaining ratio, subtract each continuing partner’s old share from the new share.

Related tags

Gaining RatioPartner RetirementNew Profit-Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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