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The old profit shares of two remaining partners are 7/20 and 1/4 respectively, while their new profit shares after reconstitution are 1/2 and 1/2. What will be their gaining ratio?

Answer and explanation

Correct answer: 3:5

Gaining ratio is calculated as new share minus old share. The first partner’s gain is 1/2 − 7/20 = 10/20 − 7/20 = 3/20. The second partner’s gain is 1/2 − 1/4 = 2/4 − 1/4 = 1/4 = 5/20. Therefore, the gaining ratio is 3/20 : 5/20 = 3:5. The key exam tip is to compare each partner’s new share with their own old share; using only the new shares would incorrectly give 1:1.

Related tags

Gaining RatioRetirement Of PartnerNew Profit-Sharing RatioPartnership AccountingShare CalculationNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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