A & B are sharing profits in ratio of 3:2 and admit C as a new partner with 1/5th share of profits. They have capital of ₹4,00,000 each. A & B sacrifice in which ratio?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Old Profit sharing ratio (3:2).
C’s share = 1/5
Let total share = 1
Remaining share = 1-1/5
= 4/5
A’s new share = 3/5 x 4/5
= 12/25
B’s new share = 2/5 of 4/5
= 8/25
New profit sharing ratio of A, B and C will be 12/25:8/25:1/5 or 12:8:5.
Note: It has been assumed that the new partner acquired his share from old partners in old ratio.
Sacrifice of A = 3/5 - 12/25
= (15-12)/25
= 3/25
Sacrifice of B = 2/5 - 8/25
= (10-8)/25
= 2/25
Thus, sacrificing ratio = 3/25 :2/25 or 3:2.