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A, B and C share profits in the ratio 5:4:1. C retires, and after retirement, the new profit-sharing ratio of A and B becomes 8:2. What is the effect on B’s share?

Answer and explanation

Correct answer: B sacrificed 2/10 share

B’s old share was 4/10 under the ratio 5:4:1. In the new ratio 8:2, B’s share is 2/10. Therefore, B’s sacrifice = old share − new share = 4/10 − 2/10 = 2/10. Hence, B sacrificed 2/10 share. Exam tip: Compare a partner’s old and new shares—if the old share is larger, there is a sacrifice; if the new share is larger, there is a gain.

Related tags

Sacrifice RatioRetirement Of PartnerNew RatioProfit Sharing RatioAccountancy Class 12New RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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