Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

During retirement, the revaluation results in a loss. Which partner(s…

During retirement, the revaluation results in a loss. Which partner(s) should bear the loss?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → All the partners in old profit sharing ratio

The gain or loss on revaluation belongs to the period before the retirement, when the retiring partner was still a partner. So it is shared by all the partners, the retiring partner included, in their old profit sharing ratio. Charging it to the continuing partners alone, or in the gaining ratio, would let the retiring partner escape his share of a fall in value that happened while he was a partner.

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.”