Reconstitution of a Partnership Firm – Retirement/Death of a Partner — Practice Quiz

Credit balance of capital account, Share of goodwill, Share of accumulated profits, Interest on capital up to retirement date

The amount due to a retiring partner includes credit balance of capital account, share of goodwill, share of accumulated profits, share of revaluation gains, interest on capital, and salary/commission. Share of revaluation loss would be a deduction, not an addition.

The excess amount paid to retiring partner over their due amount

Hidden goodwill is the amount paid to the retiring partner in excess of what is due based on their capital account balance after all adjustments. This excess represents their share of goodwill.

Revaluation Account

A Revaluation Account is prepared to record increases or decreases in the values of assets and liabilities and to bring unrecorded items into the firm's books.

Increase in liability - Debit side, Decrease in liability - Credit side

In Revaluation Account: increases in assets and decreases in liabilities appear on credit side (gains), while decreases in assets and increases in liabilities appear on debit side (losses). Unrecorded assets are credited to Revaluation Account, not debited.