This a MCQ (Multiple Choice Question) based practice test of Chapter 4 - Retirement and Death of a Partner of Accountancy of Class XII (12) for the quick revision/preparation of School Board examinations
Q How can a partner get retirement from the partnership firm?
A partner can get retirement in the following ways:
(1) With the consent of all the partners
(2) Due to ill health
(3) Agreement/contract is over
(4) By giving notice
Outgoing partner is not entitled to take _______
Outgoing partner cannot take complete goodwill of the firm. Outgoing partner is entitled for the followings:
(i) His capital account balance
(ii) His share of profit reserves & gains etc.
(iii) Revaluation profit or loss
(iv) His share of goodwill
Note: outgoing partner is entitled for his share of goodwill only and not the complete goodwill of the firm.
Which of the following is calculated at the time of Retirement of a Partner?
At the time of retirement of death of a partner we need to calculate the gaining ratio of the existing partners. The main purpose of calculating gaining ratio is to adjust the share of goodwill at the time of retirement or death of a partner.
When the New ratio is deducted with Old Ratio we get:
Gaining ratio is calculated by deducting the old ratio from the new ratio. The following formula is used to calculate the gain ratio.
Gaining ratio = New ratio – old ratio
Goodwill given in the balance sheet is debited to the partners at the time of retirement in:
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).
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.
21 : 19
Gaining Ratio is Applicable for:
The main purpose of calculating gaining ratio at the time of retirement of a partner is to adjust his amount of goodwill. After calculating his share of goodwill, gainer partners will be debited and outgoing partner will be credited.
New Profit sharing Ratio after retirement of a partner, can be calculated as:
To calculate the new profit sharing ratio at the time of retirement, following formula should be used: New Share = Old Share + Acquired Share
Goodwill Given in the old Balance Sheet will be:
Goodwill given in the old balance sheet will be written off by all the partners (including retiring partner) at the time of retirement of a partner. Goodwill will be written off in the old ratio of all the partners.
Gaining ratio is the ratio in which continuing partners have ______ the share from the outgoing partner
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.