Question

Claim of the retiring partner is payable in the following form.

• A. Fully in cash.
• B. Fully transferred to loan account to be paid later with some interest on it.
• C. Partly in cash and partly as loan repayable later with agreed interest.
• D. Any of the above method.

Answer 1

The correct option is D Any of the above method.

When a partner retires from a firm, other partners continue to run the business of the firm. Readjustments takes place in case of retirement of a partner. Whenever a partner retires, the continuing partners make gain in terms of profit sharing ratio. Therefore, the remaining partners arrange the amount to be paid to discharge the claims of the retiring partners.

Amount due to retiring partners may be discharged in the following form:

1. Fully in cash.

2. Fully transferred to loan accpunt to be paid later with some interest on it.

3. Partly in cash and partly as a loan repayble later with agreed interest.