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CA Foundation Reconstitution Retirement — practice questions

Explore 2 free Reconstitution Retirement questions in CA Foundation Accountancy. Open each question or exercise to read its content, reference answers and available explanation.

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Reconstitution Retirement questions and exercises with answers

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On retirement of a partner, gaining ratio is computed asRead the answer and worked solution →If the retiring partner's dues are not paid immediately, they are transferred toRead the answer and worked solution →

Worked practice questions

On retirement of a partner, gaining ratio is computed as

  1. Capital ratio
  2. Old ratio − New ratio
  3. New ratio + Old ratio
  4. New ratio − Old ratio
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Correct answer: D. New ratio − Old ratio

1. When a partner retires, the continuing partners' shares increase. 2. Gaining ratio = New ratio − Old ratio (positive values). 3. It indicates how much each remaining partner gains and is used to compensate the retiring partner for goodwill. 4. Hence (A) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 4 "Reconstitution of Partnership (Retirement of Partner)", §4.1 ¶§4.1_

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If the retiring partner's dues are not paid immediately, they are transferred to

  1. Retiring Partner Loan A/c
  2. Profit & Loss A/c (typical)
  3. Goodwill A/c (typical)
  4. Reserve (typical) (typical)
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Correct answer: A. Retiring Partner Loan A/c

1. Unpaid retirement dues represent a debt of the firm to the retiring partner. 2. They are transferred to the retiring partner's loan account. 3. Interest at 6% p.a. or agreed rate is allowed under the Partnership Act on unpaid balance. 4. Hence (B) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 4 "Reconstitution of Partnership (Retirement of Partner)", §4.3 ¶§4.3_

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More Accountancy topics

Partnership AccountsIntroduction to Accounting & Recording TransactionsAccounting for Partnership Firms: Retirement and Death of a PartnerCompany AccountsIndian Partnership Act 1932Analysis of Financial StatementsReconstitution AdmissionBills of Exchange