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A, B and C share profits and losses in the ratio 1:2:7. After C retires, the new ratio of A and B becomes 2:3. What will be A’s new share of profit?

Answer and explanation

Correct answer: 2/5

After C’s retirement, A and B share profits in the new ratio 2:3. The total parts are 2+3 = 5, so A’s new share is 2/5. Option C, 3/5, is B’s new share, while 1/10 was A’s old share; therefore, the old ratio should not be used for this calculation. Exam tip: Divide the partner’s part in the new ratio by the total parts of that ratio.

Related tags

New RatioPartner RetirementProfit SharingPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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