Question

A, B and C were partners in a firm sharing profits and losses in the ratio of 8 : 5 : 3. It was decided that with effect from 1st April, 2024, profits and losses will be shared in the ratio of 6 : 5 : 5. Due to change in the profit sharing ratio, A’s gain or sacrifice will be:

• A. $\dfrac{1}{8}$ gain
• B. $\dfrac{2}{8}$ gain
• C. $\dfrac{1}{8}$ sacrifice
• D. $\dfrac{2}{8}$ sacrifice

Hint:

Sacrifice = Old Share – New Share; Gain = New Share – Old Share. A’s old share>new share \Rightarrow Sacrifice.

Answer 1

The Correct Option is C

Old profit sharing ratio of A, B, C = 8 : 5 : 3
Total = 8 + 5 + 3 = 16
A’s old share = $\dfrac{8}{16} = \dfrac{1}{2}$
New profit sharing ratio = 6 : 5 : 5
Total = 6 + 5 + 5 = 16
A’s new share = $\dfrac{6}{16} = \dfrac{3}{8}$
To calculate gain or sacrifice:
Gain or sacrifice = Old share – New share
= $\dfrac{1}{2} - \dfrac{3}{8} = \dfrac{4}{8} - \dfrac{3}{8} = \dfrac{1}{8}$
Since the old share is greater than the new share, A is sacrificing $\dfrac{1}{8}$.