Question

A, B, C and D are in partnership sharing profits and losses in the ratio of 36 : 24 : 20 : 20 respectively. E joins the partnership for 20 share and A, B, C and D in future would share profits among themselves as 3/10 : 4/10 : 2/10 : 1/10. Calculate new profit-sharing ratio after admission.

Answer 1

New Profit-sharing ratio is calculated below.

Explanation:

Profit and Loss sharing ratio between A:B:C:D is given as 36: 24: 20: 20.

E’s share of profit after his admission = 20/100

Calculating combined share of A, B, C and D after E’s admission = 1- E’s share

$=1-\frac{20}{100}=\frac{80}{100}$

Calculation of new ratio:

New Ratio = Combined share of A,B,C, D $\times$ Agreed share of A,B,C,D as given

A’s new share

$=\frac{80}{100} \times \frac{3}{10}=\frac{24}{100}$

B’s new share

$=\frac{80}{100} \times \frac{4}{10}=\frac{32}{100}$

C’s new share

$=\frac{80}{100} \times \frac{2}{10}=\frac{16}{100}$

D’s new share

$=\frac{80}{100} \times \frac{1}{10}=\frac{8}{100}$

Thus, new profit-sharing ratio becomes

$\begin{array}{l}=\frac{24}{100}: \frac{32}{100}: \frac{16}{100}: \frac{8}{100}: \frac{20}{100} \\\\=6: 8: 4: 2: 5\end{array}$

This can be written as $= 6:8:4: 2:5$

Thus, the new profit-sharing ratio after admission will be $= 6:8:4: 2:5$