In the absence of any information regarding the acquisition of a share in profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share:
In the absence of any information regarding the acquisition of a share in profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share:
Solution
When a partner retires or dies, their share in profits must be distributed among the remaining (continuing) partners. If the partnership deed or any agreement doesn't specify how this share will be acquired, a standard assumption applies.
The gaining ratio is calculated in the Old Profit Sharing Ratio of the remaining partners.
This means the continuing partners will acquire the outgoing partner's share in the same proportion in which they were sharing profits among themselves before the retirement/death.
Illustration:
Suppose A, B, and C are partners sharing profits in the ratio 5:3:2. If C retires:
A and B were sharing profits in the ratio 5:3 (their old ratio among themselves).
C's share =
A and B will acquire C's share in the ratio 5:3.
A's gain =
B's gain =
This preserves the relative proportion between the continuing partners as it existed before the change in partnership.
The correct answer is Option 2: Old Profit Sharing Ratio.
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