Question

A and B are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admit C and D as new partners. A sacrifices `1/2` of his share in favour of C and B sacrifices `1/4` from his share in favour of D. Calculate their new profit sharing ratio.

Answer 1

Calculation of New Ratios:

A’s sacrifice for C = `5/8 - 1/2`

= `5/16`

B’s sacrifice for D = `1/4`

A’s new share = `5/8 - 5/16`

= `(5 xx 2)/(8 xx 2) - 5/16`

= `10/16 - 5/16`

= `(10 - 5)/16`

= `5/16`

B’s new share = `3/8 - 1/4`

= `(3 xx 2)/(8 xx 2) - (1 xx 4)/(4 xx 4)`

= `6/16 - 4/16`

= `(6 - 4)/16`

= `2/16`

C’s new share = `5/16`

D’s new share = `1/4`

`1/4 = (1 xx 4)/(4 xx 4)`

= `4/16`

The new profit-sharing ratio for A, B, C, and D = `5/16 : 2/16 : 5/16 : 4/16` or 5 : 2 : 5 : 4