Q.On retirement of a partner from a partnership firm, accumulated profits and losses are distributed to the partners in the :

On retirement, accumulated profits and losses are distributed in the old profit-sharing ratio — option (d).

Undistributed items — general reserve, reserve fund, credit/debit balance of profit and loss account — were built up while the old firm was running. They therefore belong to all partners (including the retiring one) in the ratio in which they shared profits at that time, i.e. the old profit-sharing ratio. Each partner's capital account is credited (for profits/reserves) or debited (for losses) accordingly.

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