Balbharati solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board
Chapter 4: Reconstitution of Partnership (Retirement of Partner) [Latest edition]
State whether the following statement is true or false with reasons.
Gain ratio means New ratio minus Old ratio.- True
Explanation:
As per definition, the profit-sharing ratio which is acquired by the continuing partners from the retiring partner is called gain ratio. If the gain ratio added to the old ratio we will get New ratio. It means New ratio = Old ratio + Gain ratio by interchanging the terms, we will get Gain ratio = New ratio – Old ratio.
Retiring partner’s share in profit up to the date of his retirement will be debited to Profit and Loss Suspense Account. - True
Explanation:
If a partner retires from the firm during the accounting year, the profit or loss for the period from the date of last balance sheet to the date of retirement is calculated on the basis of last year’s profit or average profit and it is credited to retiring partner’s capital A/c and for time being it debited to a new account called Profit and Loss Expense A/c. This is because final accounts cannot be prepared on any date during the accounting year.
On the retirement of a partner, a sacrifice ratio is considered. - False
Explanation: On the retirement of a partner, his share is acquired by continuing partners in a certain proportion and it is nothing but a gain for them. Therefore, on the retirement of a partner instead of sacrifice ratio gain ratio is considered.
