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If the new profit-sharing ratio of the remaining partners is 8:7 and their old profit shares were 1/2 and 1/3 respectively, what is their gaining ratio?

Answer and explanation

Correct answer: 1:4

The new ratio 8:7 has a total of 15, so the new shares are 8/15 and 7/15. The first partner’s gain is 8/15 − 1/2 = 1/30, while the second partner’s gain is 7/15 − 1/3 = 4/30. Therefore, the gaining ratio is 1/30 : 4/30 = 1:4. Option B reverses the ratio, while 8:7 is the new ratio, not the gaining ratio. Exam tip: Calculate new share − old share for each partner and then simplify the gains.

Related tags

Gaining RatioNew RatioOld RatioRetirement Of PartnerPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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