On retirement/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio should compensate the:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Remaining partners who have sacrificed as well as retiring partner.
The basic rule for goodwill on retirement or death is that the gaining partners compensate the sacrificing partners to the extent of their gain. The retiring partner always sacrifices his whole share. But when the new ratio is changed, a continuing partner may also end up with a smaller share than before, and he too has to be compensated.
Why the other options are incorrect
Option (1) Retiring partner only — Incorrect. This holds only when no continuing partner sacrifices. A continuing partner whose share falls must also be compensated.
Option (2) Remaining partners only who have sacrificed. — Incorrect. It leaves out the retiring partner, who gives up his entire share and is the main person to be paid for goodwill.
Option (3) Remaining partners only who have gained. — Incorrect. The gaining partners are the ones who pay; they cannot compensate themselves.
NCERT (2026-27 edition):
|
