Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

At the time of retirement of a Partner, gain on revaluation will be c…

At the time of retirement of a Partner, gain on revaluation will be credited to:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Capital A/c of all Partners in their old Profit Sharing ratio

The gain on revaluation arose while the old partnership existed, before the retirement. So the net gain on the Revaluation Account belongs to all partners, the retiring partner included, in the old profit sharing ratio.

Option (1) Capital A/c of retiring partner — Incorrect. He gets only his share of the gain, not all of it.

Option (3) Capital accounts of remaining partners in their old Profit sharing ratio — Incorrect. Leaving out the retiring partner would deny him his share of a gain made while he was a partner.

Option (4) Capital A/c of the remaining Partners in their new Profit Sharing ratio — Incorrect. The new ratio applies only to profits and losses after the retirement.

NCERT (2026-27 edition):
Adjustment for Revaluation of Assets and Liabilities – “… As learnt in case of admission of a partner, a Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets and/or liabilities and bringing unrecorded items into firm’s books and the same is transferred to the capital account of all partners including retiring/deceased partners in their old profit sharing ratio.”