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A, B and C share profits in the ratio 5:9:6. C retires, and the new profit-sharing ratio of A and B is 4:5. What is the gaining ratio of A and B?

Answer and explanation

Correct answer: 35:19

Under the old ratio, A’s share was \(5/20=1/4\) and B’s share was \(9/20\). Under the new ratio, A’s share is \(4/9\) and B’s share is \(5/9\). Therefore, A’s gain is \(4/9-1/4=7/36=35/180\), while B’s gain is \(5/9-9/20=19/180\). Hence, the gaining ratio is \(35:19\). Option 4:5 is the new profit-sharing ratio, not the gaining ratio. Exam tip: Gaining ratio = new share − old share.

Related tags

Partnership AccountsGaining RatioRetirement Of PartnerNew RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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