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A, B and C are partners sharing profits in the ratio 4:4:2. After C retires, the new profit-sharing ratio of A and B becomes 7:5. Which partner gains a greater share from C’s share?

Answer and explanation

Correct answer: A

Since the old ratio is 4:4:2, both A and B originally held \(4/10=2/5\). Under the new ratio, A’s share is \(7/12\) and B’s share is \(5/12\). Thus, A’s gain is \(7/12-2/5=35/60-24/60=11/60\), whereas B’s gain is \(5/12-2/5=25/60-24/60=1/60\). Therefore, A gains the greater share. Exam tip: Gain = new share − old share.

Related tags

Retirement Of PartnerNew RatioGaining RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancyClass 12 Mcq

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