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A, B, C and D share profits and losses in the ratio 6:1:2:1. A dies, and B, C and D acquire A’s share in the ratio 1:3:2. What will be the new profit-sharing ratio of B, C and D?

Answer and explanation

Correct answer: 2:5:3

A’s share is 6 out of 10, or 6/10. When this share is acquired in the ratio 1:3:2, B, C and D receive 1/10, 3/10 and 2/10 respectively. Their new shares are therefore B = 1/10 + 1/10 = 2/10, C = 2/10 + 3/10 = 5/10, and D = 1/10 + 2/10 = 3/10. Hence, the new ratio is 2:5:3. The ratio 1:3:2 represents only the manner in which A’s share is acquired; it is not the final ratio. Exam tip: add each partner’s gain from the deceased partner’s share to their original share.

Related tags

Partnership AccountsRetirement And DeathNew RatioGaining RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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