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A, B and C share profits in the ratio 7:7:4. On C’s retirement, A and B agree to share future profits in the new ratio of 5:4. What will be the gaining ratio of A and B?

Answer and explanation

Correct answer: 3:1

Under the old ratio 7:7:4, A and B each held 7/18. Under the new ratio 5:4, their new shares are 5/9 = 10/18 and 4/9 = 8/18. Therefore, A’s gain is 10/18 − 7/18 = 3/18, while B’s gain is 8/18 − 7/18 = 1/18. Hence, the gaining ratio is 3/18:1/18 = 3:1. Exam tip: calculate each continuing partner’s gain as new share minus old share, then simplify the ratio.

Related tags

Gaining RatioRetirement Of PartnerNew RatioProfit Sharing RatioPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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