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After the retirement of a partner, two remaining partners had old profit-sharing fractions of 3/8 and 1/4, respectively, while their new profit-sharing fractions are 5/8 and 3/8, respectively. What is their gaining ratio?

Answer and explanation

Correct answer: 2:1

Gain is calculated as new share minus old share. The first partner’s gain is 5/8 − 3/8 = 2/8, and the second partner’s gain is 3/8 − 1/4 = 3/8 − 2/8 = 1/8. Therefore, the gaining ratio is 2/8 : 1/8 = 2:1. Exam tip: convert fractions to a common denominator before subtracting, and check that each new share exceeds the corresponding old share.

Related tags

Gaining RatioRetirement Of PartnerOld And New SharesPartnership AccountsProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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