A and B are partners sharing profits and losses in the proportion of 7: 5. They agree to admit C, their manager, into partnership who is to get 1/6th share in the profits. He acquires this share as 1/24th from A and 1/8th from B. Calculate new profit-sharing ratio.

Solution

	A	B
OLD RATIO	7	5

C admits for 1/6 share of profit
A sacrifice his share of profit in favour of C = 1/24
B sacrifices his share of profit in favour of C = 1/8

New Ratio = Old Ratio − Sacrificing Ratio
A’s 7/12-1/24 = 13/24
B’s 5/12-1/8 = 7/24