Various accounting aspects involved on retirement or death of a partner are as follows:

(A) Adjustment in respect of unrecorded assets and liabilities

(B) Treatment of goodwill

(C) Preparation of Realization A/c

(D) Preparation of Executor's A/c

Choose the correct answer from the options given below:

(A), (B) and (D) only

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

(A) Adjustment in respect of unrecorded assets and liabilities. IT IS TRUE.  At the time of retirement or death of a partner there may be some assets which may not have been shown at their current values. Similarly, there may be certain liabilities which have been shown at a value different from the obligation to be met by the firm. Not only that, there may be some unrecorded assets and liabilities which need to be brought into books. A Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets and/or liabilities and bringing unrecorded items into firm’s books and the same is transferred to the capital account of all partners including retiring/deceased partners in their old profit sharing ratio.

(B) Treatment of goodwill- IT IS TRUE. After calculating the gaining ratio, goodwill should be addressed. This could involve either adjusting goodwill in the books or paying compensation for the goodwill to the deceased partner’s estate.

(C) Preparation of Realization A/c- IT IS NOT TRUE as realisation account is prepared at the time of dissolution of partnership firm. The Realization Account is created to close the books of account and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. 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.

(D) Preparation of Executor's loan A/c- IT IS TRUE. The final settlement made to the deceased partner's 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 or it is transferred to loan account of executor.