On retirement/death of a partner, the remaining partners who have gai…

The correct answer is Option (4) → Remaining partners (who have sacrificed) as well as retiring partner.

A partner who gains a share of profit pays for it to whoever gives up that share. On retirement the retiring partner gives up his whole share, and when the new ratio is fixed, some remaining partners may also give up part of theirs. So the gaining partners compensate the retiring partner and the sacrificing remaining partners.

Why the other options are incorrect

• Option (1) No partner — Incorrect. A gain in profit share is always paid for through goodwill.

• Option (2) Retiring partner only — Incorrect. It leaves out remaining partners who also sacrifice under the new ratio.

• Option (3) Remaining partners only (Who have sacrificed.) — Incorrect. It leaves out the retiring partner, who gives up the largest share.