Class 12 Accountancy Important Chapter 3 Reconstitution of a Partnership Firm Retirement/Death of a Partner

Class 12 Accountancy Important Chapter 3 Reconstitution of a Partnership Firm Retirement/Death of a Partner Solutions English Medium As Per The New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Accountancy Important Solutions in English Medium and select need one. AHSEC Class 12 Accountancy Additional Notes English Medium Download PDF. HS 2nd Year Accountancy Additional Solutions English Medium.

Class 12 Accountancy Important Chapter 3 Reconstitution of a Partnership Firm Retirement/Death of a Partner

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Reconstitution of a Partnership Firm Retirement/Death of a Partner

Chapter: 3

Part A: Accounting for Partnership Firms

IMPORTANT QUESTION AND ANSWER

Answer The Following Question:

1. What is the meaning of ‘Goodwill’ in a partnership firm?

Ans: Goodwill in a partnership refers to the intangible value of a firm’s reputation, customer loyalty, brand image, and market position. It is the premium value a business has beyond its physical assets and is often calculated when a partner retires or the firm is sold.

2. What is the ‘Revaluation of Assets’ at the time of retirement?

Ans: Revaluation of assets is done to bring the assets to their current market value at the time of a partner’s retirement. The profit or loss arising from revaluation is transferred to the capital accounts of all partners in their old profit-sharing ratio.

3. What is meant by the term ‘Gaining Ratio’?

Ans: The gaining ratio is the ratio in which the remaining partners acquire the share of profit from the retiring or deceased partner. It is calculated by comparing the new profit-sharing ratio with the old ratio.

4. What is the treatment of accumulated profits during a partner’s retirement?

Ans: Accumulated profits, such as reserves, are transferred to the capital accounts of the remaining partners in their old profit-sharing ratio. The retiring partner is entitled to his share of these profits.

5. How is a retiring partner’s share of goodwill handled?

Ans: A retiring partner’s share of goodwill is compensated by the continuing partners in their gaining ratio. This is done by crediting the retiring partner’s capital account and debiting the capital accounts of the continuing partners.

6. What is the importance of adjusting the capital accounts of the remaining partners?

Ans: Adjusting the capital accounts ensures that the capital structure is realigned according to the new profit-sharing ratio after a partner retires. This adjustment is essential for fair distribution of profits and liabilities.

7. What is meant by ‘Sacrificing Ratio’ in a partnership?

Ans: The sacrificing ratio refers to the ratio in which the remaining partners agree to give up their share of profits to accommodate the retiring partner. This ratio is important in determining the distribution of goodwill.

8. What happens if the goodwill is already recorded in the firm’s books?

Ans: If goodwill is already recorded, the goodwill account is written off in the old ratio. The retiring partner’s share of goodwill is then transferred to the remaining partners in their gaining ratio.

9. Why is a new partnership deed necessary upon the retirement of a partner?

Ans: A new partnership deed is required to reflect the changes in the business terms, such as profit-sharing ratio, capital contributions, and any new provisions, after a partner retires or passes away.

10. What are the methods to pay the retiring partner?

Ans: The retiring partner can be paid in full through cash, by transferring the amount to his loan account, or in instalments over a period, depending on the terms agreed by the partners in the partnership deed.

Fill in the Blanks: 

1. The amount due to the retiring partner includes his share of _________.

Ans: Goodwill.

2. The remaining partners share the profits of the new firm in the ratio of _________.

Ans: Their new profit sharing ratio.

3. If the retiring partner’s share of goodwill is not mentioned, it is usually assumed to be written off in the _________ ratio.

Ans: Old profit sharing.

4. In the event of a partner’s death, the amount due to them is transferred to their _________ account.

Ans: Executors.

5. A new partnership deed is required after the _________ of a partner.

Ans: Retirement.