Question

A, B and C are partners sharing profits in the ratio of \(5 : 3 : 2\). If C retires, the New Profit Sharing Ratio between A and B will be :

• A. \(3 : 2\)
• B. \(5 : 3\)
• C. \(5 : 2\)
• D. \(1 : 1\)

Hint:

In retirement questions, if no new gaining ratio is mentioned, the simplest trick is to hide the retiring partner's share in the old ratio. The visible ratio becomes the new profit-sharing ratio as well as the gaining ratio for the remaining partners.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
When a partner retires from a firm and the problem does not provide any specific information about how the remaining partners will acquire the retiring partner's share, it is assumed that the remaining partners will continue to share the future profits in their existing (old) relative ratio.

Step 2: Key Formula or Approach:
New Ratio = Old Ratio of remaining partners (obtained by simply crossing out the retiring partner's share).

Step 2: Detailed Explanation:
The old profit-sharing ratio of partners A, B, and C is given as:
\[ \text{A} : \text{B} : \text{C} = 5 : 3 : 2 \]
Partner C is retiring. To find the new ratio between the remaining partners A and B, we remove C's share from the old ratio.
Remaining ratio for A and B = \(5 : 3\).

Step 3: Final Answer:
The new profit sharing ratio between A and B is \(5 : 3\).