Steps involved in accounting treatment at the time of death of a part…

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

On the death of a partner, everything the deceased partner is entitled to is first worked out and collected in his capital account; only then is the balance settled with his executor. So the steps that produce amounts for the capital account come first.

(C) Preparation of revaluation account, if required — assets and liabilities are brought to their current values, and the profit or loss on revaluation is shared by all the partners, the deceased one included, in the old ratio.

(B) Ascertainment of new profit sharing ratio and gaining ratio — the gaining ratio tells how the continuing partners will compensate the deceased partner for his share of goodwill.

(A) Preparation of deceased partner’s capital account — this account collects his capital, his share of revaluation profit, goodwill, reserves and profit up to the date of death, so it can be closed only after (C) and (B).

(D) Settlement by making payment to deceased partner’s executor — the balance of the capital account is transferred to the executor’s account and paid, so this is always the last step.

The book lists the new ratio and gaining ratio before revaluation. The two steps do not depend on each other, so either may be worked first; what fixes the order is that both come before the capital account and the payment to the executor comes last.