On the retirement of Shiva from the firm of Shiva, Ram and Shyam, the Balance Sheet had a Debit balance of 12,000 in the Profit and Loss account. Which of the following will be the correct treatment of this negative balance of P and L a/c for calculating the amount payable to Shiva?
Answer & explanation
Correct answer: option 2
Debit balance in profit and loss account shows a loss and all the accumulated losses are transferred to the debit side of the Capital account in an Old ratio during the retirement of a partner.