Question :
On the retirement of Hari from the firm of Hari, Ram and Sharma, the Balance Sheet showed a credit balance of Rs. 12,000 in the Profit and Loss Account. For calculating the amount payable to Hari, this balance will be transferred
Option 1:
to the credit of the Capital Accounts of Hari, Ram and Sharma equally.
Option 2:
to the debit of the Capital Accounts of Hari, Ram and Sharma equally.
Option 3:
to the debit of the Capital Accounts of Ram and Sharma equally.
Option 4: to the credit of the Capital Accounts of Ram and Sharma equally.
Correct Answer:
to the credit of the Capital Accounts of Hari, Ram and Sharma equally.
Solution : Answer = to the credit of the Capital Accounts of Hari, Ram and Sharma equally.
In this scenario, the credit balance of Rs. 12,000 in the Profit and Loss Account represents profit earned by the firm. Upon Hari's retirement, this profit should be distributed among all partners, including Hari, as per their profit-sharing ratio. Therefore, the amount will be transferred to the credit of the Capital Accounts of Hari, Ram, and Sharma equally.
Hence, the correct option is 1.
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