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Change in Profit Sharing Ratio(PSR)

A, B and C ar...

Question

A, B and C are partners in a business sharing in the ratio of 5 : 3 : 2. B retires from the firm and his share was taken up by A and C in the ratio of 2 : 1. What is the new profit sharing ratio of the partners?

A

5 : 2

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B

4 : 3

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C

7 : 3

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D

6 : 5

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Solution

The correct option is D 7 : 3
Old ratio (A, B, and C) = 5 : 3 : 2
B's profit share = 3/10
A and C decided to take his share in the ratio of 2 : 1
Share of B taken by A = (3/10) * (2/3) = 2/10
Share of B taken by C = (3/10) * (1/3) = 1/10
New profit share = Old profit share + Share taken from R
A's new share = (5/10) + (2/10) = (5 + 2)/10 = 7/10
Q's new share = (2/10) + (1/10) = (2 + 1)/10 = 3/10
New profit sharing ratio (A and C) = 7 : 3

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