Question

If a partner retires in the middle of the year his/her share of profit from the date of last balance sheet till the date of retirement will be transferred to :

• A. Profit & Loss A/C credit side
• B. Profit & Loss suspense A/C debit side
• C. Retiring partners capital A/C debit side
• D. Profit & Loss suspense A/C credit side

Answer 1

The Correct Option is B

When a partner retires in the middle of the year, it's crucial to determine their share of profits from the last balance sheet date until their retirement date. This share is calculated and transferred to a specific account. Here's a step-by-step breakdown of the process:

• Determine the Profit Share: The first step is to ascertain the profit from the beginning of the fiscal year until the date of retirement. This is done through interim financial statements or estimation based on available data.
• Transfer to Profit & Loss Suspense Account: The calculated share of profits is transferred to the 'Profit & Loss Suspense Account' on the debit side. This is because the profit amount is due to a retiring partner, which is an outgoing for the business and hence debited.
• Adjust Retiring Partner's Capital Account: Once transferred, the amount in the 'Profit & Loss Suspense Account' is eventually adjusted against the retiring partner’s capital account as part of the settlement process.

Therefore, the correct option is "Profit & Loss suspense A/C debit side".