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A, B and C share profits and losses in the ratio 5:2:3. A dies, and B and C acquire A’s share in the ratio 2:3. What will be the new profit-sharing ratio of B and C?

Answer and explanation

Correct answer: 2:3

A’s original share is \(5/10\). B and C acquire it in the ratio 2:3, so B receives \(2/5 \times 5/10 = 2/10\) and C receives \(3/5 \times 5/10 = 3/10\). Therefore, B’s new share is \(2/10+2/10=4/10\), while C’s new share is \(3/10+3/10=6/10\). The new ratio is 4:6, which simplifies to 2:3. Exam tip: Apply the acquisition ratio to the deceased partner’s original share, then add the gain to each continuing partner’s old share.

Related tags

Partnership AccountsDeath Of PartnerNew RatioGaining RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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