Multiple choice

When $A$ and $B$, sharing profits and losses in the ratio of $3:2$, admit $C$ as a partner giving him $1/5^{th}$ share of profits. This will given by $A$ and $B$ __________ .

  1. Equally

  2. In the ratio of their profits.

  3. In the ratio of their capitals.

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

C's 1/5 share must be surrendered by A and B in the same ratio as their existing profit-sharing ratio. Since A and B share profits in the ratio 3:2, they contribute to C's share in that same ratio, which is the ratio of their profits.

AI explanation

Since the new partner C is admitted without any specific agreement on how A and B will surrender their shares, the default rule applies. Under the Partnership Act, the old partners are presumed to sacrifice in their old profit sharing ratio. Therefore, A and B will give C his 1/5th share in the ratio of their profits, which is 3:2.

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