About Retirement/Death of a Partner

A partner may decide to leave or retire from the firm for a variety of reasons, including his poor health, his age, a change in the nature of the business, and so on. In a Partnership at Will, a partner can leave at any time. Retirement causes the partners' contribution ratio and profit sharing ratio to change, resulting in a reorganization of the company. Capital, revaluation profit or loss, and goodwill are divided among the retiring partners.

Retirement of a Partner

At the end of the accounting period, a partner retires. A partner may retire midyear. In this situation, the claim must comprise the share of profit or loss, interest on capital, and, if applicable, interest on drawings from the date of the final balance sheet to the date of retirement. The key calculation is calculating profit between the previous balance sheet and retirement.

Death of a Partner

In the event of a partner's death, his claim is passed to his executors and resolved as if he had retired. While retirement occurs at the conclusion of an accounting period, a partner's death might occur at any moment. In the case of a partner, his claim shall also include his share of profit or loss, interest on capital, and interest on drawings (if any) The period from the final Balance Sheet till his death. The main problem relates to the calculation of profit for the intervening period (i.e., from the date of the last Balance Sheet to the date of the partner's death). Since closing the books and preparing final accounts is laborious, the dead partner's share of profit may be estimated based on last year's profit (or the average of the last several years) or sales.

Following are some of the multiple choice questions on the Retirement/Death of a Partner with answers that will help the students in developing their knowledge.

Retirement/Death of a Partner MCQ

1. X, Y and Z are partners sharing profits and losses in the ratio of 4:3:2. Y retires and surrenders 1/9th of his share in favour of X and the remaining in favour of Z. The new profit sharing ratio will be:

  • 1:8
  • 13:14
  • 8:1
  • 14:13

2. Which of the following is an appropriation of profit?

  • Interest on loan
  • Salary to partner
  • Employees’ salary
  • Rent

3. Gaining ratio is used to distribute ------------------ in case of retirement of a partner

  • goodwill
  • revaluation
  • profit and loss credit balance
  • both a and b

4. Ram Mohan and Sohan are partner sharing profit in the ratio of 4:3:2 , Mohan died on 1st Oct 2019,new ratio will be 1:2 among Ram and Sohan , goodwill of the firm is valued at Rs. 6,00,000_____________ amount will be transfer to Mohan capital A/c.

  • [ Rs.2,00,000 ]
  • Rs.2,10,000
  • Rs.2,20,000
  • None of these

5. If Goodwill is appearing in the balance sheet,it will be credited to

  • Retiring partners
  • Remaining partners
  • All partners
  • Gaining partner

6. State two basis for determination of profit from the date of last balance sheet to the date of death or retirement

  • On time basis
  • sales basis
  • Both A & B
  • On time basis

7. P, Q and R are partners sharing profits in the ratio of 8:5:3. P retires. Q takes 3/16th share from P and R takes 5/16th share from P. What will be the new profit sharing ratio?

  • 1:1
  • 10:6
  • 9:7
  • 5:3

8. A and B were partners. They shared profits as A- ½; B- 1/3 and carried to reserve 1/6. B died. The balance of reserve on the date of death was Rs. 30,000. B’s share of reserve will be:

  • Rs. 10,000
  • Rs. 8,000
  • Rs. 12,000
  • Rs. 9,000

9. The share of goodwill of the retiring partner is debited to remaining partners in their

  • capital ratio
  • New ratio
  • Gaining ratio
  • None of these

10. A,B, and C were partners sharing profits in the ratio of 5:3:2 B died so A and C agreed to share future profits in ratio 3:2.Their gaining ratio would be:

  • 5:2
  • 3:2
  • 1:2
  • 2:1

11. A, B, C are partners sharing profit and losses in the ratio of 4:3:1: B died and his share ofprofit taken by A Rs. 3,600 and C Rs. 4,500. What is the Gaining sharing ratio of A and C?

  • 4:5
  • 2:1
  • 68:48
  • 4: 1

12. If the Deceased partner is not paid full amount due to his executors immediately on his death, his balance is transferred to his

  • Loan A/c
  • Capital A/c
  • Bank A/c
  • Suspense A/c

13. According to section 37 of the Indian partnership act,1932,the interest payable to the representative of deceased partner on the amount left by him will be

  • 6% p.a.
  • 10% p.a.
  • the bank rate
  • None of these

14. Tick the situations in which a partnership firm comes to an end

  • Fulfillment of the object
  • Insolvency
  • Death
  • Both A & B

15. Interest payable on the capitals of the partners is charged to

  • Profit and Loss Account
  • Profit and Loss Adjustment Account
  • Realisation Account
  • Profit and Loss Appropriation Account

16. The written agreement of partnership is most commonly referred to as :

  • Agreement
  • Partnership Deed
  • Partnership contract
  • Partnership Act

17. What do you mean by Partnership?

18. If goodwill is already appearing in the books of accounts at the time of retirement,then it should be written off in __________.

  • New ratio
  • Gaining ratio
  • Sacrificing ratio
  • Old ratio

19. At the time of retirement of partner ,share of retiring partners goodwill will be credited to _____ capital account(s).

  • Remaining partner(s)
  • Retiring partners(s)
  • Both sacrificing and Gaining partner(s)
  • Gaining partner(s)

20. Gaining ratio is used to distribute ______ in case of retirement of a partner

  • Goodwill
  • Revaluation of profit or loss
  • Profit and loss account(credit balance)
  • Both b and c

21. In case of retirement of a partner any one of continuing partner sacrifice his share then his capital will be ______

  • Credited
  • Debited, Revaluation
  • Debited, Goodwill
  • None of these

22. Amount due to outgoing partner is shown on the balance sheet as his

  • Liability
  • Asset
  • Capital
  • Loan

23. In case of death of a partner in which ratio, deceased partner share in the goodwill is divided among continuing?

  • Old Ratio
  • New Ratio
  • Gaining Ratio
  • Sacrificing Ratio

24. At what rate is interest payable on the amount remaining unpaid to the executors of deceased partner in the absence of any agreement among partners ,when he opts for interest and not share of profit.

  • 12%
  • 8%
  • 6%
  • 7.5%

25. In the event of death of a partner of employees provided fund appears in the balance will be shown in

  • Capital A/c (Cr.)
  • Account (Dr.)
  • Liability side [Balance Sheet]
  • Asset side[Balance Sheet]

26. If Goodwill is appearing in the balance sheet , it will be Credited to

  • Gaining partner
  • Retiring partners
  • All partners
  • Remaining partner

27. What is gaining ratio?

  • Old Ratio- New Ratio
  • New Ratio- Old Ratio
  • Both
  • None of these

28. A ,B and C are partners profit sharing in 2:2:1.1 C retired.the new profit sharing ratio between A and B will be

  • 2:1
  • 1:1
  • 3:1
  • 2:2

29. At at the time of retirement of a partner, if Goodwill appears in the balance sheet it must be written off,the capital accounts of all partners are debited in

  • the old profit sharing ratio
  • The new profit sharing ratio
  • The new profit sharing ratio
  • in equal ratio

30. In the event of death of a partner, the amount of general reserve is transferred partners capital accounts in

  • In in the profit sharing ratio
  • old profit sharing ratio
  • Capital ratio
  • in equal ratio

31. On the death of a partner,credit balance of credit balance of profit and loss account appearing in the balance sheet should be credited to the capital account of

  • All partners including the deceased partner in their profit sharing ratio
  • The remaining partners in the the new profit sharing ratio
  • neither the deceased partner nor the remaining partners
  • None

32. As per section 37 of the Indian partnership act 1932, in the absence of partnership deed, the retiring partner is entitled to interest @______ till the time amount due to him is not paid.

  • [ 6% ]
  • 6.5%
  • Both A & B
  • None of these

33. In case of retirement of a partner, any one of continuing partner sacrifice his share then his capital will be _________.

  • ( credited )
  • Both A & B
  • None of these

34. At the of retirement of a partner Provision for bad and doubtful debts appears in in balance sheet and all Debtors become good at the time of retirement , then provision for bad & doubtful debts will be _____________ in revaluation account.

  • ( credited )
  • Retiring partners
  • None of these

35. In the event of death of a partner, the amount of general reserve is transferred partners capital accounts in

  • New profit sharing ratio
  • Old profit sharing ratio
  • in Capital ratio
  • in equal ratio

36. A ,B and C are partners sharing profits in the ratio 2:2:1 . C retired.The new profit sharing ratio between A and B will be

  • 2:1
  • 1:1
  • 3:1
  • None of these

37. The share of goodwill of the retiring partner is debited to the remaining partner in which ratio

  • Capital ratio
  • New ratio
  • Gaining ratio
  • Gaining ratio equal ratio

38. P ,Q, R and S were partners sharing profits in the ratio of 2:3:5:2. S retires and his share is acquired by Q and R in the ratio of 3:2. Calculate new ratio and gaining ratio.

  • N.R 10:21:29 G.R 3:2
  • NR. 10:23:24 G.R 3:2
  • NR 22:31:20 G R 6:6
  • NONE

39. At the time of retirement of a partner, if Goodwill appears in the balance sheet it must be written off among all the partners in ................... Ratio

  • the old profit sharing ratio
  • The new profit sharing ratio
  • The new profit sharing ratio
  • in equal ratio

40. As per section ------------ of the Indian Partnership Act, a retiring partner becomes entitled to profits after retirement if his dues remain unpaid

  • section 73
  • section 26
  • section 4
  • section 37

41. If at the time of retirement, there is some unrecorded asset, it will be ------------- to ------------- Account.

  • debited revaluation
  • credited revaluation
  • debited goodwill
  • credited partners capital account

42. When the balance sheet is prepared after retirement (subsequent to preparation of Revaluation Account), ------------- values are shown in it

  • historical
  • realisable
  • marked
  • revalued

43. At the time of retirement of a partner, share of retiring partner’s goodwill will be credited to ---------------- Capital Account(s).

  • remaining partners
  • retiring partner
  • sacrificing and gaining partner
  • both a and b

44. At the time of retirement, amount remaining in Investment Fluctuation Reserve after meeting the fall in value of Investment is:

  • Credited in Sacrificing Ratio
  • Credited in new ratio
  • Credited in old ratio
  • Credited in gaining ratio

45. As per the section 37 of the Indian partnership Act,1932,interest @______ is payable to the retiring partner if full or part of his dues remain unpaid.

  • 9% p.m
  • 12% p.m
  • 6% p.m
  • None of the above

46. When the balance sheet is prepared after retirement (subsequent to preparation of Revaluation account).---------values are shown in it

  • Historical
  • Realisable
  • Market
  • Revalued

47. If at the time of retirement ,there is some unrecorded assert,it will be________ to_________account.

  • Debited,Revaluation
  • Credited,Revaluation
  • Debited,Goodwill
  • Credited,partner's capital

48. Retiring partner compensated for parting with the firm's future profit in favour of remaining partners.The remaining partners contribute to such compensation amount in

  • Gaining ratio
  • Sacrificing rato
  • Capital ratio
  • Profit Sharing ratio

49. At the time of retirement,amount remaining in investment fluctuation reserve after meeting the fall in value of investment is

  • Credited in sacrificing ratio
  • Credited in New profit sharing ratio
  • Credited in old profit sharing ratio
  • All of above

50. As per section,______ of the Indian partnership Act,a retiring partner becomes entitled to profits after retirement if god dues remain unpaid.

  • section 37
  • section 73
  • section 26
  • section 4

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