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

Answer and explanation

Correct answer: 1:1

B’s old share was 5/10. Since B’s share is acquired in the ratio 3:2, A receives 3/5 × 5/10 = 3/10 and C receives 2/5 × 5/10 = 2/10. Therefore, A’s new share is 2/10 + 3/10 = 5/10, while C’s new share is 3/10 + 2/10 = 5/10. Hence, the new ratio is 5:5, or 1:1. The ratio 3:2 represents only the acquisition of B’s share, not the final ratio. Exam tip: New share = old share + acquired share.

Related tags

AccountancyPartner RetirementPartner DeathNew RatioProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerClass 12 Mcq

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