Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

Ajay, Bhanu and Chetan are partners in a firm sharing profit in the r…

Ajay, Bhanu and Chetan are partners in a firm sharing profit in the ratio of 3 : 4 : 2. Bhanu wants to retire from the firm. The profit on revaluation on that date was Rs. 1,80,000. New ratio between Ajay and Chetan is 5 : 3. Profit on revaluation will be distributed as:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Ajay Rs. 60,000 Bhanu Rs. 80,000 Chetan Rs. 40,000

The profit on revaluation belongs to all the old partners, the retiring partner included, in their old ratio (3 : 4 : 2). The new ratio of 5 : 3 applies only to future profits.

Ajay = 3/9 × Rs. 1,80,000 = Rs. 60,000
Bhanu = 4/9 × Rs. 1,80,000 = Rs. 80,000
Chetan = 2/9 × Rs. 1,80,000 = Rs. 40,000

NCERT (2026-27 edition):
Adjustment for Revaluation of Assets and Liabilities – “… As learnt in case of admission of a partner, 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.”