Question

A, B and C were partners sharing profit and losses in the ratio of 3 :2 :1. A retired and firm received the joint life policy Rs. 12,000. The Joint Life Policy Account appearing in the balance sheet at Rs. 20,000. What will be the treatment for the balance in Joint Life Policy i.e., Rs.8,000.

• A. Rs. 8,000 credited to partner's current account in profit sharing ratio.
• B. Rs. 8,000 debited to revaluation account
• C. Rs. 8,000 debited to partner's capital account in profit sharing ratio.
• D. Either (b) or (c)

Answer 1

Answer: (D)

Either (b) or (c)

The profit on the joint life policy i.e., RS-8,000 will either be debited to revaluation account or distributed to partners capital account in profit sharing ratio.

Either way through revaluation or through transferring in partners capital account its distributed to the partners in their profit sharing ratio.