Reconstitution of Partnership (Death of Partner)
Class-12-Commerce-Book Keeping and Accountancy-Chapter-5-Maharashtra Board
Notes
Question 1. Objective questions :
(A) Select the most appropriate answer from the alternative given below and rewrite the sentences.
(1) Benefit Ratio is the Ratio in which ..............................
(a) The old partner gain on admission of a new partner
(b) The Goodwill of a new partner on admission is credited to old partners
(c) The continuing partners benefits on retirement or death of a partner
(d) All partenrs are benefited.
(c) The continuing partners benefits on retirement or death of a partner
(2) The ratio by which existing partners are benefited .............................. .
(a) Gain Ratio (b) Sacrifice Ratio
(c) Profit Ratio (d) Capital Ratio
(a) Gain Ratio
(3) Profit and Loss Suspense Account is shown in the new Balance Sheet on .............................. side.
(a) Debit (b) Credit (c) Asset (d) Liabilities
(c) Asset
(4) Death is a compulsory
(a) Dissolution (b) Admission
(c) Retirement (d) Winding up
(c) Retirement
(5) The balance on the capital account of a partners, on his death is transferred to .................. account.
(a) Relatives (b) Legal Heir’s loan / Executors loan
(c) Partner’s capital (d) Partners Loan
(b) Legal Heir’s loan / Executors loan
(B) Write a word, term, phrase, which can substitute each of the following statement.
(1) Excess of credit side over debit side of profit and loss adjustment account.
(2) A Person who represents the deceased partner on the death of the Partner.
(3) Accumulated past profit kept in the form of reserve
(4) The Partner who died.
(5) The proportion in which the continuing partners benefit due to death of partner.
| Statement | word/phrase/term |
| (1) Excess of credit side over debit side of Profit and Loss Adjustment Account. | Profit |
| (2) A person who represents the deceased partner on the death of the partner. | Legal Heir’s or Executor |
| (3) Accumulated past profit kept in the form of reserve. | Reserve fund or General reserve |
| (4) The partner who died. | Deceased partner |
| (5) The proportion in which the continuing partners are benefited due to death of a partner. | Gain/Benefit ratio |
(C) State whether the following statements are True or False with reasons
(1) A deceased partner is not entitled to Goodwill of the firm
Statement is : False
Reason: A deceased partner is entitled to his/her share of the goodwill of the firm. At the time of death, the deceased partner's legal representative has the right to receive the value of the deceased partner's share of goodwill, which is settled according to the Partnership Deed or the provisions of the Partnership Act.
(2) A deceased partner is entitled to his share of General Reserve
Statement is : True
Reason: General Reserve represents accumulated past profits that have not yet been distributed to partners. Because the deceased partner was part of the firm when these profits were earned, their capital account is credited with their share of the General Reserve upon death.
(3) If Goodwill is written off a deceased partner’s capital account is debited.
Statement is : False
Reason: When goodwill is written off, it is debited to the continuing (surviving) partners' capital accounts in their gain ratio. The deceased partner's account is credited for their share when the goodwill is initially raised or valued.
(4) After the death of partner, entire amount due to deceased partner is paid to legal rep representative of the deceased partner.
Statement is : True
Reason: On the death of a partner, they cease to be a member of the firm, and the partnership business must settle the account with their legal representative (executor, nominee, or administrator). This amount is transferred to the executor's loan account and paid after legal formalities are completed.
(5) For recording the Profit or Loss upto the date of death, Profit and Loss Appropriation Account is operated.
Statement is : False
Reason: The deceased partner's share of profit or loss up to the date of death is typically recorded using a Profit and Loss Suspense Account. This account is used because the death often occurs during the middle of an accounting period, and the final profit or loss for the entire year has not yet been determined through the regular Profit and Loss Appropriation Account.
(D) Fill in the blanks and rewrite the following sentence.
(1) Deceased partner’s executors account is shown on the ................... side of the Balance Sheet.
(2) On death of a partner, a ratio in which the continuing partners get more share of profits in future is called as ................... ratio.
(3) Deceased partners share of profit up to the death is shown on ............. side of Balance Sheet.
(4) Benefit ratio = New Ratio .....................
(5) When Goodwill is raised at its full value and it is written off ................ account is to be credited.
(1) Deceased partner’s executors account is shown on the liabilities side of the Balance Sheet.
(2) On death of a partner, a ratio in which the continuing partners get more share of profits in future is called as gain ratio.
(3) Deceased partners share of profit up to the death is shown on assets side of Balance Sheet.
(4) Benefit ratio = New Ratio - Old Ratio
(5) When Goodwill is raised at its full value and it is written off Goodwill account is to be credited.
(E) Answer in one sentence only.
(1) What is gain ratio?
Gain ratio is the proportion by which surviving partners benefit from the extra share they receive due to the death of a partner, calculated as the new ratio minus the old ratio.
(2) In which ratio General Reserve is distributed on death of a partner?
General Reserve is distributed among the partners in their old profit sharing ratio at the time of a partner's death.
(3) To whom you distribute General Reserve on death of a partner?
General Reserve is distributed to all partners (including the deceased partner) by crediting their respective capital accounts.
(4) How death of a partner is a compulsory retirement?
Death is considered a compulsory retirement because a partner immediately ceases to be a member of the firm upon their passing.
(5) To which account Profit is to be transferred upto the date of his death?
The share of profit earned up to the date of death is transferred to the Profit and Loss Suspense Account.
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