In the absence of any information, it is assumed that the remaining partners acquire the share of profit of the retiring/deceased partner in:
In the absence of any information, it is assumed that the remaining partners acquire the share of profit of the retiring/deceased partner in:
Solution
When a partner retires or dies, their profit share must be distributed among the continuing partners. In the absence of any specific information or agreement about how this share should be divided, the continuing partners are assumed to acquire it in their Old Profit Sharing Ratio.
This is the default assumption because the old ratio represents the existing profit-sharing arrangement among the continuing partners before the retirement/death occurred.
Illustration:
If three partners A, B, and C share profits in the ratio 5:3:2, and partner C retires without any agreement about the distribution of C's share:
Old ratio of A and B = 5:3
A and B will acquire C's share (2/10) in their old ratio of 5:3.
Calculation:
- A's new share = 5/10 + (2/10 × 5/8) = 5/10 + 10/80 = 50/80 = 5/8
- B's new share = 3/10 + (2/10 × 3/8) = 3/10 + 6/80 = 30/80 = 3/8
New profit sharing ratio of A and B = 5:3
This maintains the proportionate relationship between the continuing partners while absorbing the retiring partner's share.
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