Retirement of a Partner in Accountancy

The video tutorial covers the process of handling the retirement of a partner in a business. It explains the impact on profit sharing and the necessary steps to adjust the balance sheet, including revaluation of assets and liabilities. The tutorial also details how to adjust capital for the new profit sharing ratio and handle goodwill. Finally, it guides through closing accounts and ensuring the balance sheet tallies.

What happens to the business when a partner retires?

• The business must close down.

• The remaining partners continue with a new agreement.

• The retiring partner takes over the business.

• The business is sold to a third party.

What is the first step in solving a retirement problem?

• Calculate the gain ratio.

• Close the cash account.

• Prepare the goodwill account.

• Read the balance sheet and adjustments.

Why are working notes important in solving accounting problems?

• They are only for decoration.

• They are used to impress the examiner.

• They are not necessary.

• They help in calculations and identifying mistakes.

What happens when an asset decreases in value during revaluation?

• It is recorded on the debit side of the revaluation account.

• It is ignored.

• It is recorded on the credit side of the revaluation account.

• It is recorded in the cash account.

What is the impact of revaluation on the balance sheet?

• It has no impact.

• It is only a theoretical exercise.

• It adjusts the values of assets and liabilities.

• It only affects the cash account.

What is the new profit-sharing ratio after Mr. Pat's retirement?

• 1:1

• 10:2

• 3:1

• 5:2:3

How is the additional capital introduced by remaining partners calculated?

• In the old profit-sharing ratio.

• Equally among all partners.

• In the gain ratio.

• In the new profit-sharing ratio.

What is the treatment of goodwill when a partner retires?

• It is ignored.

• It is transferred to the retiring partner.

• It is raised and written off in the gain ratio.

• It is distributed equally.

What is the final step in ensuring the balance sheet tallies?

• Recalculate the gain ratio.

• Revalue all assets again.

• Transfer the retiring partner's balance to his loan account.

• Ignore any discrepancies.

What happens if the balance sheet does not tally?

• The accounts are closed anyway.

• The balance sheet is recalculated from scratch.

• The balance sheet is discarded.

• The missing balance is transferred to the retiring partner's loan account.