Reconstitution of a Partnership Firm – Retirement/Death of a PartnerClass 12 Accountancy Part 1 Assertion & Reason Questions

Assertion (A): On retirement of a partner, the capital accounts of the gaining partners are debited to compensate the retiring partner for their share of goodwill.

Reason (R): The retiring partner is entitled to their share of goodwill because it was earned with the efforts of all partners, and the continuing partners gain the benefit of this goodwill in the future by acquiring the retiring partner's profit share.

Assertion (A): A Revaluation Account is prepared at the time of a partner's retirement to ascertain the net gain or loss on revaluation of assets and liabilities.

Reason (R): In the absence of any agreement, the outgoing partner has an option to receive either interest at 6% p.a. till the date of payment or a share of profits earned with their money.

Assertion (A): The ratio in which the continuing partners have acquired the share from the retiring or deceased partner is called the gaining ratio.

Reason (R): The gaining ratio is always equal to the old profit sharing ratio among the continuing partners.