Question 20 of 38beginner💡 UnderstandShort Answer3 marks

Write the various matters that need adjustments at the time of retirement of a partners.

Correct Answer

The various matters needing adjustment at the time of a partner's retirement are as follows:

First, the new profit sharing ratio and gaining ratio are determined for the remaining partners. Adjustments for goodwill are also necessary; if goodwill already exists in the books, it is written off by debiting all partners' capital accounts in their old profit sharing ratio.

Second, revaluation of assets and liabilities is undertaken to bring unrecorded items into the books and update values to current levels. Third, accumulated profits or losses (reserves) are transferred to the capital accounts of all partners. Lastly, the remaining partners may decide to adjust their capital contributions to align with their new profit sharing ratio.

Exercise: Questions for Practice | Q: 2 | (Chapter: 41)
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Explanation

The answer is derived directly from the provided text which lists the necessary accounting treatments upon retirement. The context explicitly mentions determining the gaining ratio, treatment of goodwill, revaluation of assets/liabilities, transfer of accumulated profits/losses, and the adjustment of partners' capitals.