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A, B and C share profits in the ratio 6:1:3. C retires, and A and B adopt a new ratio of 5:2. What is the correct gaining ratio?

Answer and explanation

Correct answer: 8:13

The governing concept is that the gaining ratio is calculated by comparing each continuing partner’s new share with the corresponding old share. The old ratio totals 10, so A’s old share is 6/10 and B’s old share is 1/10. The new ratio totals 7, so A’s new share is 5/7 and B’s new share is 2/7. A’s gain is 5/7 − 6/10 = 50/70 − 42/70 = 8/70. B’s gain is 2/7 − 1/10 = 20/70 − 7/70 = 13/70. Since the common denominator is irrelevant when forming the ratio, the gaining ratio is 8:13. Option B is merely the new ratio, option C is the old ratio, and option D incorrectly assumes equal gains. Therefore option A is correct.

Related tags

Gaining RatioNew RatioRetirement AccountingAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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