Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 58

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Question 1
1 / -0

Goodwill given in the balance sheet is debited to the partners at the time of retirement in:

A
Gain Ratio

B
Old Ratio

C
New Ratio

D
Sacrificing Ratio

Solution

At the time of retirement, goodwill given in the balance sheet should be debited to the partners in their old profit sharing ratio (including the outgoing partner).
Question 2
1 / -0

Treatment of General Reserve at the time of retirement is:

A
Only in Balance SheetAt the time of retirement of a partner, general reserve given in the balance sheet should be credited to all the partners (including outgoing partner) in their old profit sharing ratio.

B
Debit the gainer partner

C
Credit side of Capital account of all the partners

D
Debit side of Capital account of all the partners

Solution

At the time of retirement of a partner, general reserve given in the balance sheet should be credited to all the partners (including outgoing partner) in their old profit sharing ratio. As it is similar to profit which is earned by the business with the help of all partner. so shared with all partners including old partner.
Question 3
1 / -0

New Profit sharing Ratio after retirement of a partner, can be calculated as:

A
Gain Ratio – Sacrificing Ratio

B
New Ratio – Sacrificing Ratio

C
New Ratio – Acquired share

D
Old Ratio + Acquired share

Solution

To calculate the new profit sharing ratio at the time of retirement, following formula should be used: New Share = Old Share + Acquired Share.

Sometimes these acquired share is in negative. it means that there is some sacrifice by the partner and some other partner is gaining more share in the future profit.
Question 4
1 / -0

When amount due to retiring partner is paid with interest, it will be paid through which account?

A
His Loan Account

B
Executor’s account

C
His capital account

D
Balance Sheet

Solution

Sometimes amount due to the retiring partner is paid in installment with interest. For this purpose his loan account should be prepared separately and the amount due to him should be transferred to that account for the settlement.
Question 5
1 / -0

Gaining ratio is the ratio in which continuing partners have ______ the share from the outgoing partner

A
Acquired

B
Sacrificed

C
Both Acquired and Sacrificed

D
None

Solution

When a partner retires from the firm, his share will be acquired by the continuing partners. The ratio in which they acquire the share of retired partner, is known as gaining ratio.
Question 6
1 / -0

Which of the following is not prepared at the time of retirement of a partner?

A
Revaluation Account

B
Profit and Loss Suspense Account

C
Partner’s capital account

D
Balance Sheet

Solution

Following accounts are prepared at the time of retirement of a partner except profit and loss suspense account:

•Revaluation Account

•Partner’s capital account

•Balance Sheet
Question 7
1 / -0

What journal entry will be recorded when cash paid to retiring partner (for his due amount) at the time of retirement?

A

Cash A/c Dr.
To Executor’s A/c

B

Retiring Partner’s capital A/c Dr.
To Cash A/c

C

Executor’s A/c Dr.
To Cash A/c

D

Cash A/c Dr.
To Retiring partner’s capital A/c

Solution

Following journal entry will be recorded at the time of payment to retiring partner:

Retiring Partner’s capital A/c Dr.

To Cash A/c

(Being cash paid to the retiring partner)
Question 8
1 / -0

X, Y and Z are partners sharing Profits and Losses in the ratio of 8 : 7 : 5. Z retires and his share is taken equally by X and Y. Find the new profit sharing ratio.

A
21 : 19

B
5 : 7

C
7 : 5

D
19 : 21

Solution

X:Y:Z = 8:7:5
so, If Z Retires then Gaining Ratio will be:-

Hence, New Ratio will be :-

New Ratio = X : Y =21:19
Question 9
1 / -0

L, M and N are partners sharing ratio 3:2:1. M died and N the son of M is of the opinion that the rightful owner of his father’s share of profit and the profit of the firm be shared between L and N equally. L does not agree to settle the dispute because there is partnership deed which is showing old profit sharing ratio 3:2:1.

A
Distribute profit between L and N in the ratio of 3:2

B
Distribute profit between L and N in the ratio of 3:1

C
Distribute profit between L and N in the ratio of 1:11

D
Distribute profit between L and N equally

Solution

The profit should be distributed among the Land N in Ratio 3:1. Profits cannot be shared equally because there is partnership deed and profit should be distributed accordingly.
Question 10
1 / -0

Bad debts recovered will be recorded in:

A
Dr. Side of partner’s capital A/c

B
Cr. Side of revaluation account

C
Cr. Side of partner’s capital A/c

D
Dr. Side of revaluation account

Solution

Bad debts recovered will be shown in the credit side of revaluation account and same will be added to cash in the balance sheet.

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Retirement or Death of a partner Test - 58

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Retirement or Death of a partner Test - 58

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SHARING IS CARING

Question 1

Gain Ratio

Old Ratio

New Ratio

Sacrificing Ratio

Solution

Question 2

Only in Balance SheetAt the time of retirement of a partner, general reserve given in the balance sheet should be credited to all the partners (including outgoing partner) in their old profit sharing ratio.

Debit the gainer partner

Credit side of Capital account of all the partners

Debit side of Capital account of all the partners

Solution

Question 3

Gain Ratio – Sacrificing Ratio

New Ratio – Sacrificing Ratio

New Ratio – Acquired share

Old Ratio + Acquired share

Solution

Question 4

His Loan Account

Executor’s account

His capital account

Balance Sheet

Solution

Question 5

Acquired

Sacrificed

Both Acquired and Sacrificed

None

Solution

Question 6

Revaluation Account

Profit and Loss Suspense Account

Partner’s capital account

Balance Sheet

Solution

Question 7

Cash A/c Dr. To Executor’s A/c

Retiring Partner’s capital A/c Dr. To Cash A/c

Executor’s A/c Dr. To Cash A/c

Cash A/c Dr. To Retiring partner’s capital A/c

Solution

Question 8

21 : 19

5 : 7

7 : 5

19 : 21

Solution

Question 9

Distribute profit between L and N in the ratio of 3:2

Distribute profit between L and N in the ratio of 3:1

Distribute profit between L and N in the ratio of 1:11

Distribute profit between L and N equally

Solution

Question 10

Dr. Side of partner’s capital A/c

Cr. Side of revaluation account

Cr. Side of partner’s capital A/c

Dr. Side of revaluation account

Solution

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Cash A/c Dr.
To Executor’s A/c

Retiring Partner’s capital A/c Dr.
To Cash A/c

Executor’s A/c Dr.
To Cash A/c

Cash A/c Dr.
To Retiring partner’s capital A/c