The old profit sharing ratio among Gagan, Richa and Madhuri was 2:2:1. The new profit sharing ratio after Richa's retirement is 3:2. The gaining ratio is:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 1:1
Because the new profit-sharing ratio of the continuing partners is specified, the gaining ratio has to be worked out by deducting each continuing partner’s old share from his or her new share.
- Old shares (2:2:1): Gagan 2/5, Richa 2/5, Madhuri 1/5
- New shares after Richa retires (3:2): Gagan 3/5, Madhuri 2/5
- Gagan’s gain = 3/5 − 2/5 = 1/5
- Madhuri’s gain = 2/5 − 1/5 = 1/5
- Gaining ratio = 1/5 : 1/5 = 1 : 1
Richa’s 2/5 share has been divided equally between the two of them, which is why the gaining ratio is equal even though the new ratio is not.
Why the other options are incorrect
Option (1) 3:2 — Incorrect. This is the new profit-sharing ratio itself. The gaining ratio measures the increase in each partner’s share, not the share itself.
Option (3) 2:1 — Incorrect. This is the old ratio of Gagan and Madhuri between themselves, which would be the gaining ratio only if they had acquired Richa’s share in their old ratio.
Option (4) 1:2 — Incorrect. This reverses Option (3) and matches no computation from the given shares.