Question

If the firm gets dissolved due to the retirement of one the partners then what amount of JLP will be credited in partner's capital A/c?

• A. Maturity Value.
• B. Surrender Value.
• C. Policy Value.
• D. None of these.

Answer 1

Answer: (B)

Surrender Value.

At the time of retirement of a partner, readjustments takes place. Whenever a partner retires, the continuing partners make gain in terms of profit sharing ratio. Therefore, the remaining partners arrange for the amount to be paid to discharge the claims of retiring partners. Assets and liabilities are revalued, value of goodwill is raised and surrender value of joint life policy is taken into account. Revaluation of profit and reserves are transferred to capital or current accounts of partners. Lastly, final amount due to the retiring partner is determined and discharged.