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If the new profit-sharing ratio of two continuing partners is 3:2 and their gaining ratio is 1:1, which of the following statements is correct?

Answer and explanation

Correct answer: Both continuing partners acquired equal additional shares from the retiring partner

The gaining ratio is the ratio in which the continuing partners acquire the additional share surrendered by the retiring partner. A ratio of 1:1 means that both partners acquired equal additional shares. The new ratio, 3:2, represents their total future profit shares, which are not equal. Therefore, option A is correct. Exam tip: distinguish total new shares from the additional shares gained from the retiring partner.

Related tags

Partnership AccountsNew RatioGaining RatioRetirement Of PartnerProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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