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A, B and C share profits in the ratio 6:2:2. After C retires, the new profit-sharing ratio of A and B becomes 5:5. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 0:1

Under the old ratio, A’s share was 6/10 and B’s share was 2/10. Under the new ratio of 5:5, each receives 5/10. Thus, A’s share decreases by 1/10, while B’s share increases by 3/10. Therefore, the gaining ratio of A:B is 0:3, which simplifies to 0:1. Exam tip: Calculate gain as new share minus old share, and include only the partners whose shares increase.

Related tags

Gaining RatioRetirement Of PartnerNew Profit Sharing RatioPartnership AccountsShare AdjustmentNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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