CMA Intermediate · Financial Accounting · Retirement of Partner
On retirement of a partner, the amount due to him is NOT usually settled by which of the following arrangements?
A retiring partner's dues can be paid in cash, by instalments with interest, or transferred to a loan account. Debiting his capital with future unearned profits is not a settlement method, because settlement covers only existing claims.
- APaying the full amount in cash immediately
- BPaying in instalments with interest on the unpaid balance
- CTransferring the amount to his loan account
- DDebiting his capital account with the firm's future profits not yet earnedCorrect
Explanation
Amounts due to a retiring partner may be paid in cash, in instalments with interest, or transferred to a loan account. Debiting future unearned profits is not a settlement method; only existing accrued claims are settled.
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