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A, B and C share profits and losses in the ratio 1:4:5. C retires, and the new profit-sharing ratio of A and B is fixed at 2:3. What will be the gaining ratio of A and B?

Answer and explanation

Correct answer: 3:2

Under the old ratio, A’s share was 1/10 and B’s share was 4/10. Under the new ratio of 2:3, A’s share becomes 4/10 and B’s share becomes 6/10. Therefore, A’s gain is 4/10 − 1/10 = 3/10, while B’s gain is 6/10 − 4/10 = 2/10. Hence, the gaining ratio is 3:2. Remember that 2:3 is the new ratio, not the gaining ratio; the gaining ratio is calculated from the increase in each continuing partner’s share.

Related tags

Gaining RatioPartner RetirementNew RatioPartnership AccountsProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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