A, B and C share profits and losses of a firm on 1:1:1 basis. B retired from business and his share is purchased by A and C in 40:60 ratio. New profit and loss sharing ratio between A and C would be —

CS CSEET · Business Economics & Fundamentals of Accounting and Auditing · PYQS · December 2013
A, B and C share profits and losses of a firm on 1:1:1 basis. B retired from business and his share is purchased by A and C in 40:60 ratio. New profit and loss sharing ratio between A and C would be —
(A) 1:1
(B) 2:3
(C) 7:8
(D) 3:5.

Answer & Explanation:

Correct Answer: Option (C)

Correct answer: (C) 7:8. A receives 40% of B’s one-third share and C receives 60%, giving new shares 7/15 and 8/15.

Topics: Fundamentals of Accounting and Auditing

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