Steps involved in accounting treatment at the time of death/retirement of a partner -

(A) Adjustment of capital, if required

(B) Preparation of revaluation account, if required

(C) Ascertainment of new profit sharing ratio and gaining ratio

(D) Settlement of the amounts due to retired / deceased partner

Choose the correct answer from the options given below:

(C), (B), (A), (D)

The correct answer is option 2- (C), (B), (A), (D).

(C) Ascertainment of new profit sharing ratio and gaining ratio- First, we must calculate the new ratio among the remaining partners and determine the gaining ratio to compute goodwill adjustment.

(B) Preparation of revaluation account, if required- Next, revalue the assets and liabilities to reflect current values.

(A) Adjustment of capital, if required- Adjust the capital of remaining partners based on the new arrangement.

(D) Settlement of the amounts due to retired / deceased partner- This is the final settlement made to the deceased partner's. It represents the total amount owed to the deceased partner, which would be the ending balance of the capital account after all adjustments. The balance of the capital account is transferred to the executor account which is paid by the firm to the executor of deceased partner.