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

Answer and explanation

Correct answer: 3/10

A’s old profit share was 1/(1+4+5) = 1/10. After C’s retirement, A’s new share is 2/(2+3) = 2/5 = 4/10. Therefore, A’s gain = new share − old share = 4/10 − 1/10 = 3/10. The option 2/5 represents A’s new share, not the gain. Exam tip: Always calculate a partner’s gain as new share minus old share.

Related tags

Partner RetirementGain RatioNew Profit Sharing RatioAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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