Question

A and B are in partnership, sharing profits and losses in the ratio of 3 : 2. They admit C into the partnership with a `1/5`th share, which he acquires equally from A and B. The accountant has calculated the new profit-sharing ratio as 5 : 3 : 2. Is the accountant correct?

Answer 1

C’s Share acquired from A and B = `1/5 xx 1/2`

= `1/10`

A’s Share = `3/5 - 1/10`

= `3/5 xx 2/2`

= `6/10`

= `6/10 - 1/10`

= `5/10`

B’s Share = `2/5 - 1/10`

= `2/5 xx 2/2`

= `4/10`

= `4/10 - 1/10`

= `3/10`

C’s Share = `1/5 - 1/10`

= `1/5 xx 2/2`

= `2/10`

The new profit-sharing ratio of A : B : C is `5/10 : 3/10 : 2/10` or 5 : 3 : 2.