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 on with some interest on it
• C. partly in cash and partly as loan repayable later with agreed interest
• D. any of the above forms

Answer 1

The correct option is D any of the above forms

When a partner retires from a firm his share of profit is distributed among remaining partners. Assets and liabilities are revalued, profit sharing ratio is revised, profit and reserves are distributed among old partners in old profit sharing ratio etc. and finally the amount payable to retiring is determined and discharged. Amount can be discharged by any of the following way:

1. If the firm has sufficient cash then amount payable to retiring partner is paid fully in cash.

2. If the firm does not have sufficient cash, it can do part payment and retain balance to the firm as a loan and pay it later with interest.

3. Firm can also retain full amount payable to retiring partner as a loan and pay it in future with interest on the consent of retiring partner.