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Question
At the time of retirement of a partner, profit on revaluation will be credited to the capital accounts of ______.
Options
Retiring Partner
All partners in their old profit sharing ratio
The remaining partners in their old profit sharing ratio
The remaining partners in their new profit sharing ratio
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Solution
At the time of retirement of a partner, profit on revaluation will be credited to the capital accounts of all partners in their old profit sharing ratio.
Explanation:
Profit on revaluation is shared among all partners because it arises from changes in asset and liability values during their partnership.
Since the retiring partner also contributed during that time, they are entitled to a share. Hence, it is credited to all partners’ capital accounts in the old profit-sharing ratio. This ensures a fair settlement before retirement.
