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A, B, C and D share profits in the ratio 6:5:4:3. When C retires, A, B and D acquire C’s share in the ratio 2:1:1. What is the simplified new profit-sharing ratio of A, B and D?

Answer and explanation

Correct answer: 8:6:4

C’s profit share is 4 parts, and A, B and D acquire it in the ratio 2:1:1. Since the total of the acquisition ratio is also 4, A, B and D receive 2, 1 and 1 additional parts respectively. Thus, A = 6 + 2 = 8, B = 5 + 1 = 6 and D = 3 + 1 = 4. Therefore, the new ratio is 8:6:4. Exam tip: Distribute the retiring partner’s share among the gaining partners according to the specified acquisition ratio, then add those gains to their old shares.

Related tags

Retirement Of PartnerNew Profit Sharing RatioGaining RatioPartnership AccountsNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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