Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

Identify the correct sequence to be followed at the time of Retiremen…

Identify the correct sequence to be followed at the time of Retirement of a Partner:

(A) New Balance Sheet after Retirement
(B) Transferring balance to Retiring partner's Loan Account
(C) Calculation Gaining/Sacrificing Ratio
(D) Partners' Capital Account
(E) Preparation of Revaluation Account

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (C), (E), (D), (B), (A)

On retirement, the ratios are settled first, then the adjustments are made, and the balance sheet comes last:

(C) Calculation Gaining/Sacrificing Ratio — needed for goodwill adjustment.
(E) Preparation of Revaluation Account — the gain or loss is found next.
(D) Partners’ Capital Account — all adjustments are posted and the amount due is found.
(B) Transferring balance to Retiring partner’s Loan Account — the amount due is settled.
(A) New Balance Sheet after Retirement — it shows the position after all entries.

NCERT (2026-27 edition):
Ascertaining the Amount Due to Retiring/Deceased Partner

Extract from the NCERT textbook

NCERT (2026-27 edition):
Adjustment of Partners’ Capitals – “… Prepare Revaluation Account, Capital Accounts of the partners, and the Balance Sheet after retirement of B.”

NCERT (2026-27 edition):
Disposal of Amount Due to Retiring Partner – “… In case the firm is not in a position to make the payment immediately, the amount due is transferred to the retiring Partner’s Loan Account, and as and when the amount is paid it is debited to his account.”