Question 7 of 64intermediate🔧 ApplyMCQ1 mark

A and B are partners sharing profits in the ratio of 3:1. They admit C for 1/4 share in the future profits. The new profit sharing ratio will be:

Exercise: Test your Understanding - I | Q: 1 | (Chapter: 8)
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Explanation

Option (A) is correct. When C is admitted for 1/4 share, the remaining share for A and B is 3/4 (1 - 1/4). This remaining share is distributed between A and B in their old ratio of 3:1. A gets 3/4 of 3/4 = 9/16, and B gets 1/4 of 3/4 = 3/16. C's share is 1/4 = 4/16. Thus, the new profit sharing ratio is A: 9/16, B: 3/16, C: 4/16.

Solution Steps

  1. Step 1: Calculate remaining share after C's admission = 1 - 1/4 = 3/4

  2. Step 2: A's new share = 3/4×34 \times 3/4 = 9/16 (A's portion in old ratio 3:1 is 3/4)

  3. Step 3: B's new share = 1/4×34 \times 3/4 = 3/16 (B's portion in old ratio 3:1 is 1/4)

  4. Step 4: C's share = 1/4 = 4/16

  5. Step 5: New ratio = 9/16 : 3/16 : 4/16, which matches Option (A)

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