Question

On the retirement of a partner, profit on the adjustment in the value of assets should be credited to the capital accounts of ___________.

• A. all partners in the old profit-sharing ratio.
• B. the remaining partners in their gaining ratio.
• C. the remaining partners in their sacrificing ratio.
• D. the remaining partners in their new profit sharing ratio.

Answer 1

The correct option is A all partners in the old profit-sharing ratio.

At the time of retirement of a partner from partnership firm, reconstitution of partnership takes place. In this reconstitution there is revision of profit sharing ratio among partners, determination of gaining and sacrificing ratio, revaluation of assets and liabilities, adjustments for goodwill and joint life policy etc. takes place. All these adjustments takes place and finally profits or losses are distributed among old partners in old profit sharing ratio.