Partnership

Retirement/Death

Easy

common

On the death of an existing partner, in case the value of a Liability decreases then which account will be debited?

Deceased Partner Capital Account.

Profit and Loss Adjustment Account.

Realisation Account.

Liability Account.

✅ Correct Option: 4

When a partner dies, the firm revalues its assets and liabilities to determine the true financial position. If the value of a liability decreases, it means the firm owes less than what is recorded in the books, which is a gain for the firm.

To record a decrease in liability:

Liability Account will be debited to reduce its balance from the old value to the new (lower) value.

The corresponding credit goes to the Revaluation Account (or Profit and Loss Adjustment Account) to record this gain.

Example: If Creditors were recorded at ₹50,000 but are now valued at ₹45,000:

Journal Entry:

Account	Debit (₹)	Credit (₹)
Creditors A/c	5,000
To Revaluation A/c		5,000

The gain of ₹5,000 from the Revaluation Account is then distributed among all partners (including the deceased partner) in their old profit-sharing ratio.

Since liability has decreased, the Liability Account is debited to bring it down to its correct value.

2025: 26 May Shift 2

Sindhu, Neha and Priya are partners, sharing profits in the ratio of 5:3:2. Calculate the new profit sharing ratio and gaining ratio if Neha retires:

2026: 11 May Shift 2

Match the LIST-I with LIST-II

LIST-I		LIST-II
A. Preparation of Profit & Loss Suspense A/c	I.	Admission of a partner
B. When firm requires additional capital or managerial help or both for the expansion of its business	II.	Change in the existing agreement
C. This happens on account of a change in the existing partners' role in the firm.	III.	Retirement of an existing partner
D. It means withdrawal by a partner from the business of the firm which may be due to his bad health, old age or change in business interests.	IV.	Death of a partner

Choose the correct answer from the options given below:

2022: 20 July Shift 1

At the time of retirement of a Partner if retiring Partner's whole amount is treated as loan, then the total amount is Debited in :

2026: 19 May Shift 1

Asha, Deepa and Lata are partners in a firm sharing profits in the ratio of 5 : 2 : 3. Deepa retires. After making all adjustments relating to revaluation, goodwill and accumulated profit etc., the capital accounts of Asha and Lata showed a credit balance of Rs. 2,60,000 and Rs. 1,00,000 respectively. It was decided to adjust the capitals of Asha and Lata in their new profit sharing ratio. Calculate the amount brought in or withdrawn by Asha.

2023: 11 June Shift 3

Using the information given in the case study, calculate Deepali's amount of sacrifice or gain in Goodwill.

2026: 19 May Shift 1

Manan, Naman and Sohan are partners in a firm sharing profits and losses in the ratio of 2:1:1. Naman retires and Manan and Sohan decided that the capital of the new firm will be fixed at Rs 1,80,000. The capital account of Manan and Sohan shows a credit balance of Rs 1,02,000 and Rs. 61,000 respectively after making all the adjustments. Calculate the actual cash brought in or paid off to Manan.

On the death of an existing partner, in case the value of a Liability decreases then which account will be debited?

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