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A, B and C share profits in the ratio 6:3:1. C retires and the new ratio of A and B is 5:4. What is the effect on A’s share?

Answer and explanation

Correct answer: A sacrificed 2/45 share

The governing idea is that sacrifice or gain equals new share minus old share. The old total is 10, so A’s old share is 6/10 = 3/5. The continuing partners’ new ratio is 5:4, giving A a new share of 5/9. Using denominator 45, the old share is 27/45 and the new share is 25/45. Thus the change is 25/45 − 27/45 = −2/45. The negative sign means A has sacrificed 2/45 of the total profit. Therefore option A is correct. Option B reverses the direction, option C ignores the difference, and option D uses an unsupported amount.

Related tags

Sacrifice RatioRetirementNew RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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