X, Y, Z were partners sharing profits and losses in the ratio of 4:3: 2. Z retired on 1st July, 2021 on which date the capitals of X, Y, Z after all necessary adjustments stood at ₹75,000, ₹65,000 and ₹45,000 respectively. X & Y continued to carry on the business for 6 months without settling the account of Z. During the period of 6 months ended 31st December, 2021, a profit of ₹50,000 is earned by the firm.

Which of the following options is available with partner C according to section 37?

Either 1 or 2

Upon the retirement or death of a partner, the settlement of the outgoing partner's account is governed by the terms specified in the partnership deed. These terms may include various options for payment, such as:
Lump Sum Payment: The retiring partner may receive the entire amount due in a single lump sum payment immediately, as per the agreed terms.
Installment Payments: The payment may be spread out over multiple installments, with or without interest, as agreed upon in the partnership deed.
Partial Cash Payment and Installments: Part of the amount may be paid in cash immediately, and the remaining balance is settled through installments at agreed intervals.

If there is no specific agreement regarding the payment terms, Section 37 of the Indian Partnership Act, 1932 is applicable. Under this section, the outgoing partner has the option to choose one of the following methods of settlement:
Option 1: The outgoing partner can receive interest at a rate of 6% per annum on the amount due, calculated until the date of payment.
Option 2: Alternatively, the outgoing partner can opt to receive their share of profits earned with their money, based on the capital ratio.
Once all adjustments, including the partner's share of goodwill, accumulated profits, losses, revaluation gains/losses, and any other relevant factors, have been made, the total amount due to the retiring partner is ascertained. If the firm is capable of making the payment immediately, the amount is paid to the retiring partner without delay. However, if the firm is unable to make the full payment immediately, the amount due is transferred to the retiring partner's Loan Account. Subsequently, as and when the firm is able to make the payments, the amounts are debited from the Loan Account and credited to the retiring partner's account accordingly. This ensures that the retiring partner eventually receives the full amount owed to them over time as per the agreed terms. The firm acts as a debtor to the retiring partner until the outstanding amount is fully settled. By adhering to the terms of the partnership deed or the provisions of Section 37, the settlement of the retiring partner's account is carried out in a fair and transparent manner, ensuring that the retiring partner receives their rightful share promptly or over a defined period as agreed upon by all parties involved.