Practicing Success
Match the following in case of journal entries passed at the time of retirement or death of a partner.
Choose the correct answer from the options given below. |
A-I, B-II, C-III, D-IV A-IV, B-III, C-II, D-I A-IV, B-III, C-I, D-II A-I, B-III, C-IV, D-II |
A-IV, B-III, C-I, D-II |
The correct answer is option 3- A-IV, B-III, C-I, D-II.
* Withdrawal of excess money & Brought additional money- When there is a change in the capital contributions of the remaining partners at the time of retirement or death of a partner, the following journal entries are recorded to adjust the excess or deficiency of capital in the individual capital accounts: *Decrease in the asset- Revaluation account serves as a record of changes in the value of assets and liabilities. When there is an increase in the value of each asset or a decrease in liabilities, it is considered a gain and is credited to the revaluation account. Conversely, when there is a decrease in the value of assets or an increase in liabilities, it is considered a loss and is debited to the revaluation account. Additionally, any unrecorded assets are credited to the revaluation account, and unrecorded liabilities are debited to the revaluation account to ensure proper accounting. After all the adjustments are made, the revaluation account's final balance can either be a credit or a debit. If it shows a credit balance, it indicates a net gain resulting from the revaluation process. On the other hand, if it shows a debit balance, it indicates a net loss from the revaluation. Ultimately, the net gain or net loss reflected in the revaluation account will be transferred to the capital accounts of the old partners based on the previously agreed-upon ratio among the partners. *Adjustment of goodwill- Retiring or deceased partner got compensated in the share of goodwill. Gaining partners will compensate the retiring partner in their gaining ratio. Journal entry for this- Gaining partner's Capital A/c To Deceased partner's capital A/c. |