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Standard XII

Accountancy

Change in Profit Sharing Ratio(PSR)

A and B are p...

Question

A and B are partners sharing profits in the ratio of 3:1. They admit C for 1/4 share in the future profits. The new profit sharing ratio will be:

A 9/16, B 3/16, C 4/16

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A 8/16, B 4/16, C 4/16

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A 10/16, B 2/16, C 4/16

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A 8/16, B 9/16, C 10/16

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Solution

The correct option is A A 9/16, B 3/16, C 4/16
C's share = 1/4
Remaining share = 1 - 1/4 = 3/4
A's new share = 3/4 X 3/4 = 9/16
B's new share = 1/4 X 3/4 = 3/16
New profit sharing ratio of A, B and C will be 9/16; 3/16 and 4/16 respectively.
Note: It has been assumed that the new partner acquired his share from old partners in old ratio.

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