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A, B and C share profits and losses in the ratio 5:3:2. After C's death, A and B agree to share profits and losses in the new ratio 4:3. What is the correct gaining ratio of A and B?

Answer and explanation

Correct answer: 5:9

Under the old ratio, A's share was 5/10 and B's share was 3/10. Under the new ratio, A's share is 4/7 and B's share is 3/7. Therefore, A's gain = 4/7 − 5/10 = 5/70, while B's gain = 3/7 − 3/10 = 9/70. Hence, the gaining ratio is 5:9. Option 4:3 is the new profit-sharing ratio, not the gaining ratio. Exam tip: Calculate each partner's gain as new share − old share, then compare the gains.

Related tags

Gaining RatioPartner RetirementPartner DeathNew RatioPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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