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A, B, C and D share profits in the ratio 2:2:1:5. D dies, and A, B and C acquire D’s share in the ratio 1:2:2. What will be the new profit-sharing ratio?

Answer and explanation

Correct answer: 3:4:3

The original total ratio is 10, so D’s share is 5/10. When this share is acquired in the ratio 1:2:2, A receives 1/10, B receives 2/10, and C receives 2/10. Therefore, the new shares are A = 2/10 + 1/10 = 3/10, B = 2/10 + 2/10 = 4/10, and C = 1/10 + 2/10 = 3/10. Hence, the new ratio is 3:4:3. Exam tip: Divide the deceased partner’s share according to the gaining ratio and add each gain to the partner’s original share.

Related tags

Partnership AccountsDeath Of PartnerNew Profit Sharing RatioGaining RatioReconstitutionNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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