Question

Assertion (A): A, B and C were partners sharing profits in 4 : 3 : 2. A retires and new profit sharing ratio between B and C is agreed at 2 : 1. On that date, advertisement suspense account of ₹ 1,80,000 existed in the balance sheet. It will be written off among all partners in old ratio.

Reason (R): Advertisement Suspense Account is a fictitious asset and at the time of retirement of a partner all fictitious assets are written off to the Capital Accounts of old partners in old profit sharing ratio.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct and (R) is the correct reason of (A).