CBSE Class 12 Accountancy Retirement or Death of a Partner MCQs Set 05

Answer: (b) All partners in their old ratio

Explanation:
1. Revaluation profit relates to the period before retirement, so it belongs to all partners (including the retiring partner) in their old profit-sharing ratio.

Teacher's Note:
1. Revaluation profit or loss always goes to all partners in the old ratio, never in the new or gaining ratio.

Answer: (b) to the debit of the capital accounts of Hari, Ram and Sharma equally

Explanation:
1. A debit balance of Profit and Loss Account is an accumulated loss; it is debited to all partners’ capital accounts in the old ratio (equal here, as no ratio is given).

Teacher's Note:
1. Accumulated losses shown on the assets side are debited (not credited) to all partners, including the retiring one.

Answer: (b) to the credit of the capital accounts of Manu, Arora and Shahid

Explanation:
1. The surplus Workmen Compensation Reserve is an accumulated profit, so it is credited to all partners in their old ratio.

Teacher's Note:
1. Only the surplus of the reserve over the actual claim is distributed; the claim part goes to a provision.

Answer: (c) All partners

Explanation:
1. Reserves are past undistributed profits, so they are transferred to all partners in the old ratio.

Teacher's Note:
1. Reserves are always shared in the old ratio because they were earned before the change.

Answer: (b) All partner’s capital accounts (including deceased partner’s capital account)

Explanation:
1. Credit balance of Profit and Loss Account is undistributed profit earned by all partners, so it is credited to all, including the deceased partner.

Teacher's Note:
1. Death is treated just like retirement for reserves and accumulated profits.

Answer: (d) 5 : 3

Explanation:
1. P’s share = 4/8; each gains 2/8.
2. Q = 3/8 + 2/8 = 5/8; R = 1/8 + 2/8 = 3/8. New ratio = 5 : 3.

Teacher's Note:
1. Add the gain to each partner’s old share; do not simply divide the total equally.

Answer: (c) His executor’s account

Explanation:
1. The amount due to a deceased partner is payable to his legal representatives, so it is transferred to his Executor’s Account.

Teacher's Note:
1. Entry: Deceased Partner’s Capital A/c Dr. To Deceased Partner’s Executor’s A/c.

Answer: (c) 5 : 3

Explanation:
1. With no new ratio agreed, the remaining partners continue in their old ratio, so gaining ratio = old ratio = 1/2 : 3/10 = 5 : 3.

Teacher's Note:
1. When no new ratio is given, gaining ratio is the old ratio of the continuing partners.

Answer: (b) Gaining ratio

Explanation:
1. The continuing partners gain the retiring partner’s share of profit, so they compensate him for goodwill in their gaining ratio.

Teacher's Note:
1. Goodwill compensation is always in the gaining ratio on retirement and in the sacrificing ratio on admission.

Answer: (a) 12:13

Explanation:
1. Keetu’s share 7/15: Neetu gains 7/15 × 3/5 = 21/75, Seetu gains 7/15 × 2/5 = 14/75.
2. Neetu = 15/75 + 21/75 = 36/75; Seetu = 25/75 + 14/75 = 39/75. New ratio = 36 : 39 = 12 : 13.

Teacher's Note:
1. The ratio 3 : 2 is the gaining ratio, not the new ratio; add the gains to the old shares.

Answer: (a) Debited to Revaluation A/c

Explanation:
1. An unrecorded liability brought into books is a loss, so it is debited to Revaluation Account.

Teacher's Note:
1. Unrecorded liability = loss (debit Revaluation); unrecorded asset = gain (credit Revaluation).

Answer: (c) New share – Old share

Explanation:
1. Gaining share = New share − Old share.

Teacher's Note:
1. Sacrifice is Old − New; gain is New − Old. Do not mix them up.

Answer: (c) Accumulated losses

Explanation:
1. Accumulated losses reduce the partners’ claims and are debited to all partners’ capital accounts in the old ratio; the other three are credited.

Teacher's Note:
1. Anything on the assets side as a fictitious loss (debit P&L balance, deferred revenue expenditure) is debited to partners.

Answer: (b) All Partners’ Capital Account

Explanation:
1. The surplus of Workmen Compensation Reserve is an accumulated profit and is credited to all partners in the old ratio.

Teacher's Note:
1. Never take the surplus reserve to Revaluation Account; it goes directly to partners.

Answer: (a) Revaluation A/c

Explanation:
1. Increase in the value of assets is a gain, credited to Revaluation Account.

Teacher's Note:
1. Asset increase and liability decrease are credited to Revaluation Account.

Answer: (d) to find out results of revaluation of assets and liabilities

Explanation:
1. Revaluation Account records changes in values of assets and liabilities and shows the resulting profit or loss.

Teacher's Note:
1. Revaluation profit/loss is a one-time adjustment, not part of the year’s trading profit.

Answer: (b) will be allowed @ 6% p.a.

Explanation:
1. Under Section 37 of the Indian Partnership Act, 1932, the executor is entitled to interest @ 6% p.a. on the unpaid amount (or a share of profit earned by its use).

Teacher's Note:
1. Remember the 6% p.a. rule of Section 37 for unpaid amounts due to an outgoing or deceased partner.

Answer: (c) Debit of Profit and Loss Suspense Account

Explanation:
1. Entry: Profit and Loss Suspense A/c Dr. To Deceased Partner’s Capital A/c. So the share of profit is debited to Profit and Loss Suspense Account.

Teacher's Note:
1. Profit and Loss Suspense Account is used because the year’s accounts are not yet closed on the date of death.

Answer: (a) 6% p.a.

Explanation:
1. Section 37 gives the executors interest @ 6% p.a. on the amount due, or alternatively the share of profit earned by its use.

Teacher's Note:
1. The executors choose either 6% p.a. interest or the share of profit attributable to the use of the unpaid amount.

Answer: (a) ₹ 1,41,640

Explanation:
1. N’s share = 2/5. Reserve 30,000 × 2/5 = 12,000; Goodwill 60,000 × 2/5 = 24,000; Revaluation profit 14,100 × 2/5 = 5,640.
2. Amount due = 1,00,000 + 12,000 + 24,000 + 5,640 = ₹ 1,41,640.

Teacher's Note:
1. Take only the retiring partner’s share of goodwill, reserve and revaluation profit, and add them to his capital.