Question

A and B are partners in a firm sharing profit in 4:1 ratio. They admitted “C” as a new partner for 25% share in the profit, which he acquired wholly from A. Determine the new profit-sharing ratio.

• A. 11:4:5
• B. 4:1:1
• C. 3:1:1
• D. 8:1:1

Hint:

When new partner acquires share from old partner, subtract that share from old partner and keep others unchanged.

Answer 1

The Correct Option is A

Step 1: Initial Profit Sharing Analysis
A and B share profits in a 4:1 ratio, totaling 5 parts.
Step 2: C's Admission and Share Acquisition
C is admitted for a 25% share, equivalent to \(\frac{1}{4}\). C obtains this entire 25% from A's existing share.
Step 3: Calculation of New Profit Shares
A's adjusted share = Original share – C's acquisition = \(\frac{4}{5} - \frac{1}{4} = \frac{16}{20} - \frac{5}{20} = \frac{11}{20}\)
B's share is unchanged = \(\frac{1}{5} = \frac{4}{20}\)
C's share = \(\frac{1}{4} = \frac{5}{20}\)
Step 4: Final Profit Ratio Determination \[A : B : C = 11 : 4 : 5\]