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A, B, C and D share profits in the ratio 2:4:3:1. B retires, and A, C and D acquire his share in the ratio 1:2:1. What will be the new profit-sharing ratio of A, C and D?

Answer and explanation

Correct answer: 3:5:2

The total of the original ratio is 10, so B’s share is 4/10. Distributed in the ratio 1:2:1, this gives A, C and D gains of 1/10, 2/10 and 1/10 respectively. Their new shares are therefore 2/10+1/10=3/10, 3/10+2/10=5/10 and 1/10+1/10=2/10. Hence, the new ratio is 3:5:2. Exam tip: Divide the retiring partner’s share according to the gaining ratio and add each gain to the partner’s old share.

Related tags

Retirement Of PartnerNew RatioGaining RatioPartnership AccountsProfit Sharing RatioNew RatiosReconstitution Retirement Or Death Of A PartnerAccountancy

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