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Calculate New Profit-sharing Ratio. - Accountancy

Sum

A and B are partners sharing profits and losses in the proportion of 7 : 5. They agree to admit C, their manager, into partnership who is to get 1/6th share in the profits. He acquires this share as 1/24th from A and 1/8th from B. Calculate new profit-sharing ratio.

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Solution

Old Ratio = A : B
                 = 7 : 5
C admits for `1/6` share of Profit

A sacrifices his share of profit in favour of C = `1/24`

B sacrifices his share of profit in favour of C = `1/8`

New Ratio = Old Ratio - Sacrificing Ratio

A's = `7/12 - 1/24 = 13/24`

B's = `5/12 - 1/8 = 7/24`

New Profit Sharing Ratio = A : B : C
                                        = `13/24 : 7/24 : 1/6`

                                        = `[ 13 : 7 : 4 ]/24`

                                        = 13 : 7 : 4

Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 1
Chapter 5 Admission of a Partner
Exercise | Q 3 | Page 85
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