Question

A and B are partners in a firm Sharing profits in the ratio of 2:1. C joins the firm. A surrenders 1/4th of his share and B 1/5th of his share in favour of C. Find the new profit sharing ratio.

Answer 1

Answer:

A:B:C::25:8:27

Explanation:

1. C=1/4+1/5=9/20;A=2/3_1/4=5/12;B=1/3_1/5=2/15
2. A=5/12×5/5=25/60
3. B=2/15×4/4=8/60
4. C=9/20×3/3=27/60

Answer 2

The new profit sharing ratio of A : B: C = 15 : 4: 7.

GIVEN: A and B share = 2:1; A surrender = 1/4 and B surrender= 1/5

TO FIND: New Profit-sharing ratio

SOLUTION:

Old ratio (A: B) = 2: 1

Sacrificing ratio = Old ratio * Surrender share

A sacrifice = $\frac{1}{4}$ ×$\frac{2}{3}$

                 = $\frac{1}{6}$

B sacrifice = $\frac{1}{5}$ × $\frac{1}{3}$

                = $\frac{1}{15}$

New share = Old share - sacrificing ratio

A's new share = $\frac{2}{3}$ - $\frac{1}{6}$

                       = $\frac{3}{6}$

B's new share = $\frac{1}{3}$ - $\frac{1}{15}$

                       = $\frac{2}{15}$

C's share is made from the sacrifice ratio of both A and B

C's share=  $\frac{1}{6}$ + $\frac{1}{15}$

                = $\frac{7}{30}$

Now, we will equalize the denominator.

A= $\frac{15}{30}$

B= $\frac{4}{30}$

C= $\frac{7}{30}$

Therefore, the new profit-sharing ratio of A: B: C = 15: 4 : 7

• The ratio in which a firm divides its earnings and losses.
• The partnership agreement will contain the profit-sharing percentages for the partnership.
• This will show the amount that can be directly attributed to each partner, which is often stated as a share of total earnings.

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