Correct Sequence: C, B, A, D

The accounting treatment at the time of death of a partner follows a logical sequence:

Step 1: Revaluation Account (C)

Assets and liabilities must be revalued first to reflect their current market values. Any profit or loss from revaluation is shared among all partners (including the deceased partner) in their old profit sharing ratio.

This must be done before any settlements because the deceased partner is entitled to their share of any increase or decrease in firm's value up to the date of death.

Step 2: New Profit Sharing Ratio and Gaining Ratio (B)

After death, the remaining partners will continue the business with a new profit sharing arrangement.

Gaining Ratio = New Ratio - Old Ratio

The gaining ratio determines how much each continuing partner benefits from the deceased partner's share. This is crucial for adjusting goodwill, as the gaining partners must compensate the deceased partner's account for their share of goodwill.

Step 3: Deceased Partner's Capital Account (A)

Now the deceased partner's capital account can be prepared, which includes:

• Opening capital balance
• Share of revaluation profit/loss
• Share of goodwill (credited by gaining partners)
• Share of reserves and accumulated profits
• Interest on capital (if applicable)
• Less: Drawings and interest on drawings

This gives the total amount due to the deceased partner's executor.

Step 4: Settlement/Payment (D)

The final amount is paid to the deceased partner's legal representative or executor as per the partnership agreement.

Correct Answer: Option 2