Arrange the following steps in the order of the accounting treatment in case of death of a partner.
A. Adjustment of capital account of the existing partner.
B. Transfer of share of goodwill to deceased partner's capital account.
C. Transfer of amount from deceased partner's capital account to executor's account.
D. Calculation of New Profit Ratio and Sacrificing Ratio.
Choose the correct answer from the options given below:
Arrange the following steps in the order of the accounting treatment in case of death of a partner.
A. Adjustment of capital account of the existing partner.
B. Transfer of share of goodwill to deceased partner's capital account.
C. Transfer of amount from deceased partner's capital account to executor's account.
D. Calculation of New Profit Ratio and Sacrificing Ratio.
Choose the correct answer from the options given below:
Solution
Ratios must be computed first because goodwill is adjusted through the gaining partners in that ratio. Goodwill is then credited to the deceased partner. Next the continuing partners' capitals are adjusted, and finally the balance standing to the deceased partner's credit is transferred to his executor.
Order: D, B, A, C.
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