What are the accounting aspects that are involved at the time of reti…

What are the accounting aspects that are involved at the time of retirement or death of a partner?

A. Ascertainment of profit or loss upto the date of retirement or death of partner.

B. Realisation of assets and liabilities that are shown in the books of Accounting only.

C. Adjustment of capital.

D. Calculation of new profit sharing ratio and gaining ratio.

E. Treatment of goodwill

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A, C, D and E only

Retirement or death reconstitutes the firm but the business goes on, so the accounting aspects are much like those on admission.

(A) Ascertainment of profit or loss upto the date of retirement or death of partner. — True.

(B) Realisation of assets and liabilities that are shown in the books of Accounting only. — False. Assets are realised only on dissolution of the firm; on retirement they are only revalued.

(C) Adjustment of capital. — True.

(D) Calculation of new profit sharing ratio and gaining ratio. — True.

(E) Treatment of goodwill — True.

NCERT (2026-27 edition):
Ascertaining the Amount Due to Retiring/Deceased Partner – “… Thus, similar to admission, the various accounting aspects involved on retirement or death of a partner are as follows: 1. Ascertainment of new profit sharing ratio and gaining ratio; 2. Treatment of goodwill; 3. Revaluation of assets and liabilities; 4. Adjustment in respect of unrecorded assets and liabilities; 5. Distribution of accumulated profits and losses; 6. Ascertainment of share of profit or loss up to the date of retirement/death; 7. Adjustment of capital, if required; 8. Settlement of the amounts due to retired/deceased partner;”

NCERT (2026-27 edition):
Accounting Treatment – “When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio.”