Day: April 22, 2020

If a partnership revalues its assets upon the retirement of one of the partners, any resulting loss should be . . . . . .?

Select ONE answer:

1. credited to the old partners’ capital accounts in the old profit sharing ratios.
2. credited to the new partners” capital accounts in the new profit sharing ratios.
3. debited to the old partners’ capital accounts in the old profit sharing ratios.
4. debited to the new partners’ capital accounts in the new profit sharing ratios.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – Losses are always debited to the partners’s capital / current accounts whereas profits are always credited to them. The retiring partner bears a share of the loss because it arose while he / she was still a partner.
4. Not correct

 

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