The sum due to the retiring partner includes :
(A) His share of profits up to the date of retirement.
(B) His share of goodwill;
(C) His share of accumulated profits ;
(D) His share in the gain of revaluation of assets and liabilities;
Choose the correct answer from the options given below:
The sum due to the retiring partner includes :
(A) His share of profits up to the date of retirement.
(B) His share of goodwill;
(C) His share of accumulated profits ;
(D) His share in the gain of revaluation of assets and liabilities;
Choose the correct answer from the options given below:
Solution
When a partner retires from a partnership firm, the amount payable to them is calculated by considering all their entitlements in the firm. Let's examine each component:
(A) Share of profits up to the date of retirement - The retiring partner has worked until the retirement date and is entitled to the profit earned during that period in their profit-sharing ratio. This is included.
(B) Share of goodwill - At the time of retirement, the firm's goodwill is valued. The retiring partner has contributed to building this goodwill and must be compensated for their share. This is included.
(C) Share of accumulated profits - Any reserves, undistributed profits, or accumulated funds that exist in the books belong to all partners. The retiring partner's share in these must be paid to them. This is included.
(D) Share in the gain of revaluation - Assets and liabilities are revalued at the time of retirement to reflect their true values. Any profit or loss arising from this revaluation is distributed among all partners (including the retiring partner) in their profit-sharing ratio. This is included.
The retiring partner's capital account is credited with all these amounts to arrive at the total sum due to them. Therefore, all four components form part of the amount payable to the retiring partner.
Correct Answer: Option 3 - (A), (B), (C) and (D)
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