Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

The outgoing partner's account is settled as per the terms of partner…

The outgoing partner's account is settled as per the terms of partnership deed. However, in the absence of any agreement, Section 37 of the Indian Partnership Act, 1932 is applicable, which states that the outgoing partner has an option to:-

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his/her money.

NCERT (2026-27 edition):
Disposal of Amount Due to Retiring Partner – “The outgoing partner’s account is settled as per the terms of partnership deed i.e., in lumpsum immediately or in various instalments with or without interest as agreed or partly in cash immediately and partly in instalment at the agreed intervals. In the absence of any agreement, Section 37 of the Indian Partnership Act, 1932 is applicable, which states that the outgoing partner has an option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his/her money (i.e., based on capital ratio).”