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A, B and C share profits in the ratio 8:5:2. When A retires, B and C acquire A’s share in the ratio 3:5. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 8:7

A’s share is \(8/15\) of the total profit. B receives \(3/8\) of A’s share, i.e. \(3/15\), while C receives \(5/15\). Thus, B’s new share is \(5/15+3/15=8/15\), and C’s new share is \(2/15+5/15=7/15\). Therefore, the new ratio is \(8:7\). The ratio 5:2 is the old ratio, while 3:5 is only the gaining ratio for A’s share. Exam tip: First calculate the retiring partner’s share, then distribute it according to the gaining ratio.

Related tags

Partnership AccountsRetirement Of PartnerNew RatioGaining RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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