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A, B and C share profits in the ratio 5:4:1. After C retires, the new profit-sharing ratio of A and B becomes 2:3. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 0:1

Old shares are A = 5/10 = 1/2 and B = 4/10 = 2/5. Their new shares are A = 2/5 and B = 3/5. Thus, A’s share decreases by 1/10, while B’s share increases by 1/5. Therefore, only B gains, so the gaining ratio of A:B is 0:1. The ratio 1:2 compares A’s sacrifice with B’s gain; it is not the gaining ratio because A is not a gaining partner. Exam tip: Subtract each partner’s old share from the new share to identify gain or sacrifice.

Related tags

Gaining RatioPartner RetirementNew Profit Sharing RatioPartnership AccountingNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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