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A, B and C share profits in the ratio 6:5:4. After C’s retirement, the new profit-sharing ratio of A and B becomes 1:2. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 0:1

Under the old ratio, A’s share was \(6/15=2/5\) and B’s share was \(5/15=1/3\). Under the new ratio, A receives \(1/3\) and B receives \(2/3\). Thus, A’s share decreases by \(1/15\), while B’s share increases by \(1/3\). Therefore, only B gains, so the gaining ratio of A:B is 0:1. Exam tip: Calculate each partner’s gain as new share minus old share; a negative result indicates a sacrifice, not a gain.

Related tags

Gaining RatioRetirement Of PartnerNew Profit Sharing RatioPartnership AccountsShare AdjustmentNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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