01 Retirement and Death of Partner Notes With Questions by Sachin Pareek

Chapter 6
Retirement & Death

of a Partner
Your Accounts Best Friend

Chapter 6: Retirement & Death of a Partner
01 02 03
Profit Sharing Goodwill, Revaluation & Determination of
Ratio Accumulated Profits Amount Due
04 05
Balance DEATH OF A
Sheet PARTNER
Reconstitution of
Partnership Firm

Meaning
Partnership is the result of an agreement between persons for

sharing the profits of a business.
Any change in the partnership agreement brings to an end the

existing agreement and a new agreement comes into force.
The change in the agreement results in changes in the

relationship among the partners.
In such a case, although the firm continues, it amounts to the

reconstitution of the partnership firm.
A firm is reconstituted in the event of:
(i) Change in the profit-sharing ratio among the existing partners.
(ii) Admission of a partner or partners.
(iii) Retirement of a partner.
(iv) Death of a partner.
(v) Amalgamation of two or more partnership firms.

Retirement of a
Partner
🙂🙂🙂

Meaning
Retirement of a partner means the retiring partner does not remain

a partner of the firm but the firm continues.
It means the firm continues its business with the remaining or
continuing partners in accordance with the new or changed
Partnership Deed.

Meaning
A partner may retire from the firm:

(i) if there is an agreement to that effect; or
(ii) if the agreement does not exist then if all the partners agree
to his retirement; or
(iii) if the Partnership is at Will, by giving a notice (written) to the
remaining partners of his decision to retire.

Liability of a Retiring Partner
Liability for the Acts before Retirement

A retiring partner remains liable for all the acts of the firm up to
the date of his retirement. [Section 32(2)]
Liability for the Acts after Retirement

A retiring partner also continues to be liable to third parties for the
acts of the firm even after his retirement until a public notice of his
retirement is given. [Section 32(3)]

Adjustments Required on Retirement of a Partner
1. Determining New Profit-sharing Ratio and Gaining Ratio.
2. Valuation and Adjustment of Goodwill.
3. Revaluation of Assets and Reassessment of Liabilities.
4. Reserves and Undistributed Profits (Accumulated Profits)/Losses.
5. Determination and Payment of amount due to Retiring Partner.

01
Profit
Sharing Ratio

Meaning
As a result of retirement of a partner, profit-sharing ratio among

the remaining or continuing partners may or may not change.
However, their combined share increases.
After retirement of the partner, new profit-sharing ratio of the

remaining or continuing partners and their gaining ratio is
determined.

Your Accounts Best Friend Basics of Partnership
Meaning
New profit-sharing ratio on retirement of a partner is the ratio in

which the remaining or continuing partners will share future profits
and losses.

Meaning
New profit share of each remaining or continuing partner is the

total of his old profit share in the firm and the profit share taken by
that partner from the retiring partner.
It may be expressed as,

New Profit Share of a Continuing Partner:
Old Profit Share
+
Profit Share taken (Acquired) from the retired partner

Meaning
New Profit-sharing Ratio, upon retirement, may have to be

determined when
1. The new profit-sharing ratio is not given; and

2. The remaining partners take profit share of the retiring partner
in the ratio that is different from their present profit-sharing
ratio.

Case 1. When one partner retires and the new profit-sharing ratio
among the remaining partners is not given.
When a partner retires and new profit-sharing ratio among the

remaining partners is not given, it is presumed that the remaining
partners will continue to share profits and losses in their old profit-
sharing ratio.

Illustration 1 (New Profit-sharing Ratio of Remaining Partners).
(i) Sachin, Kapil and Kadir were partners, sharing profits in the ratio of 1/2,
2/5 and 1/10. Find the new profit-sharing ratio of the remaining partners if:
(a) Sachin retires,
(b) Kapil retires
(c) Kadir retires.

Illustration 1 (New Profit-sharing Ratio of Remaining Partners).
(ii) Jatti, Sahil and Rati are partners sharing profits in the ratio of 3:2:2. Find
new profit sharing ratio of the remaining partners if:
(a) Jatti retires,
(b) Sahil retires and
(c) Rati retires.

Case 2. When the remaining partners take profit share of the retiring
partner in an agreed ratio.
The remaining partners may decide to take profit share of the retiring
partner in a specific ratio. In such cases, profit share taken by each
partner is added to his existing profit share and new profit-sharing
ratio is determined.

Illustration 2 (Remaining Partners take Specific Profit Share of the Retiring Partner).
A, B and C are sharing profits and losses in the ratio of 5: 3:2. B retired. His
profit share is taken by A and C in the ratio of 2 : 1. Calculate new profit-
sharing ratio.

Illustration 3 (Profit share of the Retiring Partner is taken by Only One Partner).
A, B and C are partners sharing profits in the ratio of 2: 2:1. B retired and his
share is taken by C. Calculate new profit-sharing ratio of A and C.

Illustration 4.
A, B and C are in partnership sharing profits and losses as 1/2, 3/10 and 1/5
respectively. B retires and his share is taken by A and C in the ratio of 2: 1.
Thereafter, D is admitted for 1/4th share of profit, half of which was given by
A and the remaining share was taken equally from A and C. Calculate profit-
sharing ratio after D's admission.

Gaining Ratio
Gaining Ratio is the ratio in which the gaining partners take the profit share of
retiring partner, i.e., the ratio in which their profit share increases in the firm.
Gaining ratio is determined because the gaining partner or partners compensate

the retiring partner by paying goodwill.

Calculation of Gaining Ratio
1. When information is not given or Agreement does not exist.

2. When new profit-sharing ratio is given.
3. When retiring partner's profit share is taken by the remaining or
continuing partners in a specific ratio.

Situation 1. When information is not given or When Agreement Does

Not Exist:
In the absence of an agreement, it is assumed that after retirement of

a partner, remaining partners will continue to share profits in the
same ratio in which they shared profits before retirement of the
partner. Thus, in effect, continuing partners gain profit share of the
outgoing partner in their old profit-sharing ratio.
In this situation, profit-sharing ratio is their gaining ratio.

Illustration 5 (New Profit-sharing Ratio and Gaining Ratio).

(i) A, B and C were partners sharing profits in the ratio of 3: 2: 1. Find the
gaining ratio when:
(a) A retires,
(b) B retires or
(c) C retires.

Illustration 5 (New Profit-sharing Ratio and Gaining Ratio).

(ii) X, Y and Z share profits in the ratio of 1/2, 1/3 and 1/6, Z retired. Find the
gaining ratio and new profit-sharing ratio of X and Y.

Situation 2. When New Profit-sharing Ratio is Given

If new profit-sharing ratio among the remaining partners is given,
gaining ratio will be different.
In this case, gain of each continuing partner is calculated by deducting

his old profit share from his new profit share, i.e.,

Illustration 6
Ram, Manohar and Jashan are partners sharing profits in the ratio of 1/2,
3/10 and 1/5. Manohar retires from the firm and Ram and Jashan agree to
share future profits in the ratio of 3: 2. Calculate the gaining ratio:

Illustration 7
A, B and C are partners sharing profits in the ratio of 2/5, 2/5 and 1/5
respectively. C retired, A and B decided to share future profits in the ratio of
2:1. Calculate the gaining ratio.

Illustration 8
X, Y and Z are partners sharing profits and losses in the ratio of 4:3:2. Y retired
giving 1/9th of his share to X and the remaining to Z.
Calculate new profit-sharing ratio and the gaining ratio.

Illustration 9
Hitesh, Rakesh and Mukesh are partners sharing profits and losses in the ratio
of 1/2, 3/10 and 1/5. Rakesh retired from the firm and Hitesh and Mukesh
decided to share future profits and losses in the ratio of 3: 2. Calculate gaining
ratio.

Situation 3: When retiring partner's profit share is taken by the

remaining or continuing partners in an agreed ratio.
Gaining Share of each remaining or continuing partner is. calculated

giving effect to the agreement, i.e., percentage share taken from the
retired partner's share. The profit share gained is added to the existing
(old) profit share of each remaining or continuing partner to determine
his new profit share.

Illustration 10
Channi, Manni and Amar were partners sharing profits and losses in the ratio
of 4: 3:2. Amar retired from the firm. Channi took 4/9th of Amar's share and
the balance was taken by Manni.
Calculate new profit-sharing ratio and gaining ratio.

Illustration 11
Divya, Vikas and Varun were partners sharing profits in the ratio of 1/2: 1/8:
3/8 respectively. Vikas retired and gave 1/9th from his share to Divya and the
remaining to Varun. You are required to calculate gaining ratio and new profit-
sharing ratio.

Illustration 12
Akash, Yogesh and Bhavesh were partners sharing profits and losses in the
ratio of 4:31. Yogesh retired and gaining ratio between Akash and Bhavesh is
4:5. Calculate New Profit-sharing Ratio.

Important Notes
Unless agreed otherwise, New Profit-sharing Ratio among remaining or

continuing partners is same as their Old Profit-sharing Ratio.
Unless agreed otherwise, Gaining Ratio of remaining or continuing partners is

same as their Old Profit-sharing Ratio.

Difference Between Sacrificing Ratio & Gaining Ratio
Basis Sacrificing Ratio Gaining Ratio

Meaning It is the ratio in which the old partners It is the ratio in which the remaining
have sacrificed their profit shares in partners take the outgoing (retired or
favour of the new or incoming partner. deceased) partner's share.
Objective It is calculated to determine the It is calculated to determine the amount of
amount of compensation to be paid by compensation to be paid by each of the
the incoming partner to the sacrificing gaining partner to the outgoing partner as
partners as premium for goodwill or premium for goodwill or goodwill.
goodwill.
When to Calculate It is calculated at the time of It is calculated at the time of retirement or
admission of a new partner and on death of a partner and on change in the
change in the profit-sharing ratio. profit-sharing ratio.
Method of Calculation Sacrificing Ratio = Old Profit sharing Gaining Ratio = New Profit sharing Ratio -
Ratio - New Profit sharing Ratio Old Profit sharing Ratio

02
Valuation
and
Adjustment of
Goodwill

Meaning
Retiring partner is entitled to his share of goodwill at the time of

retirement because goodwill was earned by the firm at the time
when he was a partner.
Continuing/gaining partners compensate the retiring partner by

paying goodwill in their gaining ratio.
Value of goodwill is determined as per the terms of the partnership

agreement or as agreed among them.

Formula
Retiring Partner's Share of Goodwill

= Value of Firm's Goodwill x Profit Share of Retiring Partner

Not Shown in the balance sheet
Self Earned
Calculated at the time of Reconstitution of
Partnership Firm
Goodwill
Shown in the balance sheet
Purchased
Come into existence when purchase
consideration is more than net assets

AS-26
AS-26, 'INTANGIBLE ASSETS’
• Goodwill is recognised in the books of account when consideration in

money or money's worth has been paid for it.
• In case of admission/retirement/death of a partner or change in

profit-sharing ratio among. partners, goodwill is not recognised in
the books of the firm because no consideration in money or money's
worth is paid for it.
• Goodwill may be adjusted through Capital Accounts of the partners

or Goodwill may be raised but also written off within the financial
year.

Journal Entries
Retiring Partner's Capital Account is credited with his share of current value of goodwill
and Gaining Partners' Capital Accounts are debited in their Gaining Ratio for
compensating retiring partner.
The Journal entry is:

Gaining Partners' Capital A/cs [Individually in Gaining Ratio] Dr.
To Retiring Partner's Capital A/c
(Adjustment made for goodwill on retirement)

When Goodwill does not exist in the Books
Illustration 13 (When all the Remaining or Continuing Partners Gain).

Surender, Ramesh, Naresh and Mohan are partners in a firm sharing profits in
the ratio 2:1:2:1. On the retirement of Naresh, goodwill was valued at 72,000.
Surender, Ramesh and Mohan decided to share future profits equally. Pass the
adjustment entry for goodwill without opening Goodwill Account. Show your
workings clearly.

Journal Entries
Goodwill existing in the books of account is written off by debiting all the Partners'
Capital Accounts including retiring partner in their old profit-sharing ratio.
The Journal entry is:
All Partners' Capital A/cs [In Old Profit-sharing Ratio] Dr.
To Goodwill A/c [With Existing Value of Goodwill]
(Existing goodwill written off)
Thereafter, retiring partner's share of goodwill is credited in his Capital Account by

debiting Gaining Partners' Capital Accounts in their gaining ratio.
The entry is:

Gaining Partners' Capital/Current A/cs [in gaining ratio] Dr.
To Retiring Partner's Capital/Current A/c [With his share of goodwill]
(Adjustment made for goodwill on retirement)
When Goodwill does exist in the Books
Illustration 14 (When one of the Remaining Partners Gain and Goodwill Exists in the Books).
X, Y and Z are partners sharing profits in the ratio of 2:3:5. Goodwill exists in
their books at 50,000. X retires and on the day of X's retirement, goodwill is
valued at 45,000. Y and Z decided to share future profits equally.
Pass necessary Journal entries.

Illustration 15 (When all the Remaining Partners Gain and Goodwill Exists in the Books).
Arjun, Bhim and Nakul are partners sharing profits and losses in the ratio of
14:5:6. Bhim retires and gives 5/25th of his share to Arjun and remaining share
to Nakul. Goodwill of the firm is valued at 2 years' purchase of super profits
based on average profits of last 3 years. Profits for the last 3 years are*
50,000, 55,000 and 60,000 respectively. Normal profits for the similar firm
are 30,000. Goodwill already exists in the books of the firm at 75,000. Profit
for the first year after Bhim's retirement was 1,00,000.
Give the necessary Journal entries to adjust Goodwill and distribute profit
showing your workings.

Illustration 16 (New Profit-sharing Ratio).

A, B and C are partners sharing profits in the ratio of 4: 3: 1. B retired, giving
his share of profits to A and C for 8,100; 3,600 being paid by A and 4,500 by C.
Profit for the year after B's retirement was 10,500.
You are required
(i) To give necessary Journal entries to record the transfer of B's share to A
and C;
(ii) To calculate new profit-sharing ratio and distribute the profits between A
and C. A and C bring the necessary amount.

Journal Entries
If any of the continuing partners also sacrifices a part of his share in the profits of the
firm on retirement of a partner, his Capital Account is also credited along with the
Retiring or Outgoing Partner's Capital Account with his proportion of sacrifice and the
Gaining Partners' Capital Accounts are debited by recording the following entry:
Gaining Partners' Capital A/cs [Who have gained] Dr.

To To Retiring Partner's Capital A/c [With his Share of Goodwill]
To Sacrificing Partner's Capital A/c [Who has sacrificed]

Sacrifice by a Continuing Partner or Partners along with Retiring Partner
Illustration 17.
Armaan, Anup and Sushant were partners in a firm sharing profits in the ratio
of 3:2:1. Sushant retired and the new profit-sharing ratio between Armaan and
Anup was 1: 2. On Sushant's retirement, goodwill of the firm was valued at
30,000.
Pass necessary Journal entry for the treatment of goodwill on Sushant's

retirement.

Meaning
Some times, account of the retiring partner is settled by paying a

lump sum amount. The amount paid in excess of amount due to
him, i.e., capital, share in reserves or undistributed profits and gain
(profit) or loss on revaluation of assets and reassessment of
liabilities, etc., is his share of goodwill.

Meaning
For example, Amit, Bikas and Charu are partners. Bikas retired and his Capital
Account after making adjustments for reserves and profit on revaluation was
1,28,000. Amit and Charu agreed to pay him 1,50,000 in settlement of his
claim.
It implies that 22,000 (i.e.,1,50,000 1,28,000) is Bikas's share in the goodwill

of the firm.
This is accounted in the books of account by debiting 22,000 in Amit's and

Charu's Capital Accounts in their gaining ratio and crediting Bikas's Capital
Account.

Hidden Goodwill
Illustration 18.
Amal, Bikki and Chandu are partners sharing profits in the ratio of 1:2:3.
Chandu retires and his capital, after making adjustments for reserves and
gain (profit) on revaluation is ¹2,20,000. Amal and Bikki agreed to pay him
2,50,000 in full settlement of his claim. Pass necessary Journal entry for the
treatment of goodwill if new profit-sharing ratio is decided at 1:3.

03
Revaluation
Account

Meaning

Meaning
At the time of retirement of a partner, assets of the firm are revalued and
liabilities are reassessed with a purpose that the retiring partner does not
benefit or loose because of the change in the values. To give effect to the
change in values, Revaluation Account is prepared in the same manner as is
prepared at the time of change in profit-sharing ratio and admission of a
partner.
Gain (Profit) or loss from the revaluation is distributed among all the partners in
their old profit-sharing ratio. Gain (Profit) on revaluation is credited to all
Partners' Capital Accounts and if it results in a loss, their Capital Accounts are
debited.
Note: Revaluation Account Is Also Known As Profit And Loss Adjustment Account
The partners may decide to:
(i) Record revised (changed) values of assets and liabilities in the books
(ii) Not to record the revised values of assets and liabilities in the books

(a) When Assets and
Liabilities are shown
at their Revised
Values

Record revised (changed) values of assets and liabilities in the books
When revised (changed) values of assets and liabilities are to be recorded Revaluation
of assets and reassessment of liabilities are recorded in an account 'Revaluation
Account' or 'Profit and Loss Adjustment Account’.
(a) Increase in the value assets and decrease in the amount of liabilities are credited to
this account
(b) while decrease in the value of assets and increase in the amount of liabilities are
debited to this account.
(c) Unrecorded assets, if any, are credited and
(d) unrecorded liabilities are debited to this account.
(e) The balance in the account is gain (profit), if total of credit side is more than the
total of debit side and
(f) loss, if total of debit side is more than the total of credit side.
(g) Gain (Profit or loss so determined is credited or debited to Partners' Capital (or
Current) Accounts their old profit-sharing ratio.

Specimen of Revaluation Account
Particular Amount Particular Amount

Specimen of Revaluation Account
Particular Amount Particular Amount
To Assets A/c (Individually) By Assets A/c (Individually)
-Decrease in value on revaluation -- -Increase in value on revaluation --
To Liabilities A/c (Individually) By Liabilities A/c (Individually)

-Increase in amount on reassessment -- -Decrease in amount on reassessment --
To Unrecorded Liabilities A/c -- By Unrecorded Assets A/c --
To Partner's Capital A/c (Remuneration) -- By Loss* on Revaluation transferred to --

Partners' Capital (or Current) A/cs
To Cash/Bank A/c (Expenses) --
To Gain (Profit)* on Revaluation transferred --

to Partners' Capital (or Current) A/cs
xx xx

Illustration 19.
Balance Sheet of Deepika, Jyotika and Alia sharing profits and losses in the ratio of 5: 3:2 as at 31st
March, 2021 was:
Liabilities Amount Assets Amount
Sundry Creditors 15,000 Cash at Bank 27,000
Capital A/cs: Debtors 16,000
Deepika 46,000 Less: Provision for Doubtful Debts (800)
Joytika 34,000 Stock 12,800
Alia 25,000 Plant and Machinery 35,000
Land and Building 30,000
1,20,000 1,20,000
Jyotika retired from the firm on 1st April, 2021. Deepika and Alia decided to share future profits and losses in
the ratio of 3: 1. Following adjustments are agreed:
(i) Debtors of 1,100 be written off as it is no longer receivable.
(ii) Provision for Doubtful Debts be maintained at the existing rate.
(iii) Stock be written down by 1,055.
(iv) Land and Building be written up by 11,000.
(v) Plant and Machinery be reduced to 34,000.
(vi) Sundry Creditors of 700 be written back as no longer payable.
(vii) A provision of 600 be made for repairs.
(viii) An old computer completely written off was sold for 2,000 as scrap.
(ix) Firm had to pay 5,000 to an employee injured in an accident.
(x) An unrecorded machinery valued at 10,000 is to be recorded.
(b) When Assets and
Liabilities are not
shown at their
Revised (Changed)
Values

Not to Record revised (changed) values of assets and liabilities in the books
When revised (changed) values of assets and liabilities are not to be recorded
Gain (Profit) or Loss on Revaluation of Assets and Reassessment of Liabilities is
adjusted through Partners' Capital Accounts By passing an adjustment entry:
• By debiting/crediting the Capital (or Current) Accounts of gaining partners and
crediting/debiting the Retiring partner.

Step 1: Calculation of the Net Effect of Revaluation:
(i) Increase in the value of Assets xx

(ii) Add: Decrease in the amount of Liabilities xx
(iii) Less: Decrease in the value of Assets (xx)
(iv) Less: Increase in the amount of Liabilities (xx)
Net Effect of Revaluation xxxx

Step 2: To find Sacrificed/(Gained) Profit Share of Each Partner:
A B C
(i) Old Profit Share xx xx xx
(ii) Net Profit Share xx xx xx
(iii) Sacrificed/(Gained) Profit Share (i - ii) xx xx xx

Step 3: Calculation of Proportionate Amount of Net Effect of Revaluation:
For Gaining Partner = Gained Profit Share x Net Effect of Revaluation.
For Retiring Partner = Sacrificed Profit Share x Net Effect of Revaluation.

Step 4: Pass the following Journal Entry:
(i) For Gain (Profit) on Revolution

Gaining Partners' Capital A/cs Dr.
(ii) For Loss on Revolution

Retiring Partner's Capital A/c Dr.
To Gaining Partners' Capital A/cs

(b) When Assets and Liabilities are not shown at their Revised (Changed) Values
Example:
Amit, Sumit and Jatin were sharing profits and losses in the ratio of 5: 3:2.
Jatin retired and Amit and Sumit decided to continue the firm sharing profits
and losses equally after Jatin's retirement. They decided to record the effect
of the following revaluations without affecting the book values of the assets
and liabilities by passing an Adjustment Entry:
Book Values Revised Values

Land and Building 5,00,000 5,50,000
Plant and Machinery 2,50,000 2,40,000
Sundry Creditors 60,000 55,000
Outstanding Expenses 60,000 75,000
Pass necessary adjustment entry.

Solution
Step 1: Calculation of the Net Effect of Revaluation:

(i) Increase in the value of Land and Building 50,000
(ii) Decrease in amount of Sundry Creditors 5,000
(iii) Decrease in value of Plant and Machinery (10,000)
(iv) Increase in the amount of Outstanding Expenses (15,000)
Gain (Profit) on Revaluation 30,000
Step 2: Calculation of Sacrificed/(Gained) Profit Share:
Calculation of Sacrificed/(Gained) Profit Share: A S J

(i) Old Profit Share 5/10 3/10 2/10
(ii) New Profit Share 1/2 1/2 Nil
Sacrificed/(Gained) Profit Share (i) – (ii) Nil 2/10 -2/10

Solution
Step 3: Calculation of Proportionate Amount of Share of Gain (Profit) on Revaluation:

Sumit's Gained Share = 2/10 x 30,000 = 6,000.
Jatin's Sacrificed Share = 2/10 x 30,000 = 6,000.
Journal Entry will Be:
Sumit's Capital A/c Dr. 6,000

To Jatin's Capital A/c 6,000
(Proportionate amount of gain (profit) on revaluation adjusted

04
Accumulated
Profits and
Losses

Meaning

Meaning
Reconstitution of the firm is based on the agreement among the

partners, including retiring partner.
Free reserves, accumulated profits and losses if they exist in the
Balance Sheet of the firm, are normally transferred to the Capital
Accounts of all the partners (including retiring partner) in their Old
Profit-sharing Ratio.

Meaning
The partners may Also decide to use the free reserves, fully or
partly, to meet a possible loss. For example, on retirement
partners may decide to use (transfer) part of General Reserve to
Workmen Compensation Reserve or Investment Fluctuation
Reserve. In this case, balance free reserve is transferred to the
Capital Accounts of all the partners.
Accumulated Profits means Profits earned but not distributed or

made using the share of partners.
Accumulated Losses means losses accrued but not transferred to
partner’s capital account or loss/ expense yet not written off.
Journal Entries
1. For Accumulated Profits:

General Reserve A/c Dr.
Profit and Loss A/c (Cr. Balance) Dr.
Workmen Compensation Reserve A/c Dr.
Investment Fluctuation Reserve A/c Dr.
To All Partner’s Capital/ Current A/c (OPSR)
2. For Accumulated Losses:

All Partner’s Capital/ Current A/c (OPSR) Dr.
To Profit and Loss A/c (Dr. Balance)
To Deferred Revenue Expenditure A/c

Accumulated Profits & Losses
Illustration 20.
X, Y and Z are partners in a firm sharing profits and losses in the ratio of 3: 2:1.
Z retires from the firm on 1st April, 2021. On the date of Z's retirement,
following balances existed in the books of the firm:
General Reserve - 90,000;
Profit and Loss Account (Dr.) - 15,000;
Employees' Provident Fund - 1,20,000.
Workmen Compensation Reserve - 12,000 which was no more required.
Pass Journal entries for the adjustment of these items on Z's retirement.

Illustration 21.
Raja, Nawab and Badshah are equal partners in a firm whose books are closed
on 31st March every year. Give Journal entry to distribute General Reserve of
40,000 at the time of retirement of Nawab when 25% of the balance of
General Reserve is to be transferred to Investments Fluctuation Reserve.

Illustration 22.
(a) Give the Journal entry to distribute 'Workmen Compensation Reserve of
70,000 at the time of retirement of Neeti, when there is a claim of 25,000
against it. The firm has three partners Raveena, Neeti and Rajat

Illustration 22.
(b) Give the Journal entry to distribute 'Workmen Compensation Reserve' of
60,000 at the time of retirement of Sajjan, when there is no claim against it.
The firm has three partner’s Rajat, Sajjan and Kavita.

Illustration 22.
(c) Give the Journal entry to distribute 'Investment Fluctuation Reserve' of
4,000 at the time of retirement of Z, when Investments (market value 19,000)
appears at 20,000. The firm has three partners X, Y, and Z.

Illustration 23.
Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of
5:3:2. Goodwill appeared in their books at a value of 60,000 and General
Reserve at 20,000. Karan decided to retire from the firm. On the date of his
retirement, goodwill of the firm was valued 2,40,000. The new profit-sharing
ratio decided among Alia and Shilpa was 2:3.
Record necessary Journal entries on Karan's retirement.

05A
Determination
of Amount Due
to Retiring
Partner

Meaning

Determination of Amount Due to Retiring Partner
Amount due to the retiring partner is determined by preparing Capital Account of the
retiring partner taking into account the following:
The Items which Increase the Claim The Items which Decrease the Claim
Opening credit balances of Capital and Current Opening debit balances of Capital and Current
Accounts. Accounts of retiring partner.
Share in the gain (profit) on Revaluation of Assets Drawings and interest thereon, of the retiring
and Reassessment of Liabilities. partner.
Share of reserves and accumulated profits. Advance or loan taken by him from the firm, if any.
Share of goodwill of the firm. Share in the accumulated losses of past year/years.
Share of profit up to the date of his retirement. Share in the loss on Revaluation of Assets and
Reassessment of Liabilities.
Salary and/or interest on capital due to the retiring
partner till the date of his retirement.

Determination of Amount Due to Retiring Partner
If the question is silent on payment to Retiring Partner, the amount due to

him is transferred to his 'Loan Account’.
The Journal entry passed is:

To Retiring Partner's Loan A/c

Interest on Amount due: Unless agreed otherwise, the retiring partner gets interest @
6% p.a. till the time amount due to him is not paid. At his option, he may take, instead
of the interest, share of profits that have been earned by the use of the amount due to
him.

05B
Payment of
Amount Due to
Retiring
Partner

Amount due to the retiring partner may be paid in the following two ways:
1. Payment of Due Amount in Lump Sum, and
2. Payment in Instalments.

1. Payment of Due
Amount in Lump
Sum

1. Payment of Due Amount in Lump Sum
If the due amount is paid to the retiring partner in lump sum on the date of retirement,
following entry is passed:

To Cash/Bank A/c
If retiring partner's Capital Account after adjustments shows 'Debit Balance', that much
amount is receivable from the retiring partner.
The entry is:
Cash/Bank A/c Dr.


2. Payment in
Instalments:

2. Payment in Instalments:
• It may be agreed among the partners that the amount payable to the retiring
partner will be paid in instalments.
• In such a case, balance in his Capital Account is transferred to his Loan
Account on which interest is paid as is agreed and is shown as liability in the
Balance Sheet of the reconstituted firm, till it is paid.
• If interest is payable, interest is paid or credited to his Loan Account on the
basis of the amount outstanding in the beginning of the year.
• The amount of instalment may be principal amount plus interest or it may be
including interest.
• The amount paid is debited to his Loan Account and next year interest is
allowed on the balance.
Accounting Entries
(i) Amount due is transferred to Retiring Partner's Loan A/c

Retiring Partner's Capital A/c
(ii) For interest provided

Interest A/c
(iii) For payment of instalment
Retiring Partner's Loan A/c

To Bank A/c

Partial Payment to
Retiring Partner

Partial Payment to Retiring Partner
It is possible that at the time of retirement, a part of amount due to retiring

partner is paid and the balance amount is transferred to his Loan Account. The
Journal entry passed is:

To Cash/Bank A/c

Illustration 24.
M, N and G were partners in a firm sharing profits and losses in the ratio of 5: 3: 2. On 31st March,
2016, their Balance Sheet was as under:
BALANCE SHEET OF M, N AND G as on 31st March, 2016
Creditors 55,000 Cash 40,000
General Reserve 30,000 Debtors 45,000
Capitals: Less: Provision 5,000 40,000
M 1,50,000 Stock 50,000
N 1,25,000 Machinery 1,50,000
G 75,000 3,50,000 Patents 30,000
Building 1,00,000
Profit and Loss A/c 25,000
4,35,000 4,35,000
M retired on the above date and it was agreed that:

(i) Debtors of 2,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts
will be maintained.
(ii) Patents will be completely written off and stock, machinery and building will be depreciated by 5%.
(iii) An unrecorded creditor of 10,000 will be taken into account.
(iv) N and G will share the future profits in the ratio of 2:3.
(v) Goodwill of the firm on M's retirement was valued at ₹ 3,00,000.
Pass necessary Journal entries for the above transactions in the books of the firm on M's retirement.
Solution

Illustration 25. (Determining the Amount Due to Retiring Partner and Transfer to his Loan Account).
A, B and C are partners in a business, sharing profits and losses in the ratio of 3: 2:1. Their Balance
Sheet as at 31st March, 2021 was:

Sundry Creditors 16,000 Cash in Hand 6,000
General Reserve 60,000 Cash at Bank 10,000
Capital A/cs: Sundry Debtors 90,000
A 1,00,000 Stock in Hand 70,000
B 1,00,000 Machinery 60,000
C 1,00,000 3,00,000 Building 1,40,000
3,76,000 3,76,000
C retired from business on 1st April, 2021. It was agreed that the amount due to him paid on 30th June, 2022. It
was also agreed to adjust the value of assets as follows:
(i) Provide for doubtful debts @ 5% on Sundry Debtors.
(ii) Reduce Stock by 5% and Machinery by 10%.
(iii) Building to be revalued at 1,51,000.
(iv) Goodwill of the firm is valued at 1,50,000.
(v) A and B will continue to carry on the business and shall share profits and losses equally in future.
Prepare Revaluation Account, Partners' Capital Accounts, C's Loan Account and Balance Sheet of the firm as at 1st
April, 2021.

Solution

Loan Account
(Deleted From
Syllabus)

Illustration 26. (Amount of Instalment is Principal plus Interest).
X, Y and Z were in partnership sharing profits and losses in the ratio 3:2:1. Z
retired from the firm on 1st April, 2017. After adjustments, his Capital Account
shows a credit balance of 1,00,000 on the date of retirement. Z is to be paid in
four equal annual instalments from 31st March, 2018 along with interest @
10% p.a. Prepare Z's Loan Account until he is paid the amount due to him. The
firm closes its books on 31st March every year.

Illustration 27 (If Amount of Instalment includes Interest).
X, Y and Z were in partnership sharing profits and losses equally. Z retired
from the firm. After adjustment, his Capital Account shows a credit balance of
1,00,000 as on 1st April, 2018. Z is to be paid in two equal instalments of 37,500
each including interest @ 10% p.a. on the outstanding balance of each year
and the balance including interest in the third year. Prepare Z's Loan Account
till he is paid the amount due to him.

Illustration 28 (Annual Instalments Payable at the end of the Financial Year).
X, Y and Z were in partnership sharing profits and losses equally. 'Y' retired
from the firm. After adjustments, his Capital Account shows a credit balance
of 75,000 as on 1st April, 2018. Y was paid 15,000 immediately on retirement
and the balance amount is to be paid in three equal annual instalments along
with interest @ 5% p.a. Pass the Journal entry and prepare Y's Loan Account
until he is paid the entire amount due to him. The firm closes its books on 31st
March every year.

Illustration 29
Banwari, Girdhari and Murari are partners in a firm sharing profits and losses
in the ratio of 4 5 6. On 31st March, 2014, Girdhari retired. On that date the
capitals of Banwari, Girdhari and Murari before the necessary adjustments
stood at 2,00,000, 1,00,000 and 50,000 respectively. On Girdhari's retirement,
goodwill of the firm was valued at 1,14,000. Revaluation assets and
reassessment of liabilities resulted. Reserve in the books of the firm was
30,000.

Illustration 30 (Amount is to be paid in Semi-annual Instalments).
P, Q and R were in partnership sharing profits and losses in the ratio of 2:3:1. Q
retired from the firm. After all the adjustments, his Capital Account shows a
credit balance of 2,20,000 as on 1st April, 2019. 'Q' is to be paid 60,000 by
cheque immediately and balance in four equal semi-annual instalments along
with interest @10% p.a. on the unpaid amount. Prepare Q's Loan Account till
he is paid the amount due to him. The firm closes its books on 31st March every
year.

Illustration 31
X, Y and Z are partners in a firm. Y retires and his claim including his capital
and his share of goodwill is 3,00,000. There was unrecorded furniture valued at
15,000, half of which was given to an unrecorded creditor of 30,000 in
settlement of his claim of 15,000 and remaining half was given to Y at a
discount of 10% in part satisfaction of his claim. Balance
of Y's claim was discharged by current date cheque. Give necessary Journal
entries to record this arrangement.

06
Balance Sheet

Illustration 32.
Anita, Gaurav and Sonu were partners in a firm sharing profits and losses in proportion to their capitals. Their Balance
Sheet as at 31st March, 2019 was as follows:
BALANCE SHEET OF ANITA, GAURAV AND SONU
Capitals: Land and Building 5,00,000
Anita 2,00,000 Investments. 1,20,000
Gaurav 2,00,000 Debtors 1,50,000 1,40,000
Sonu 1,00,000 5,00,000 Less: Provision for Doubtful Debts 10,000 1,00,000
Investment Fluctuation Fund 40,000 Stock 1,70,000
General Reserve 30,000 Cash at Bank
Creditors 4,60,000
10,30,000 10,30,000
On the above date, Anita retired from the firm and the remaining partners decided to carry on the business. It was
agreed to revalue the assets and reassess the liabilities as follows:
(i) Goodwill of the firm was valued at 3,00,000 and Anita's share of goodwill was adjusted in the capital accounts of the
remaining partners, Gaurav and Sonu.
(ii) Land and Building was to be brought up to 120% of its book value.
(iii) Bad debts amounted to 20,000. A provision for doubtful debts was to be maintained at 10% on debtors.
(iv) Market value of investments was 1,10,000.
(v) 1,00,000 was paid immediately by cheque to Anita out of the amount due and the balance was to be transferred to
her loan account which was to be paid in two equal annual instalments along with interest @ 10% p.a.
Prepare the Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on Anita's
retirement. Your Accounts Best Friend
Solution

Illustration 33 (Payment by Equal Instalments along with Interest).
Following is the Balance Sheet as at 31st March, 2018 of M/s Gopi, Krishan and Ram who share profits in
the ratio of: Gopi 4/7, Krishan 2/7 and Ram 1/7:
Capital A/cs: Goodwill 7,000
Gopi 30,000 Land and Building 20,000
Krishan 20,000 Plant and Machinery 26,500
Ram 15,000 65,000 Motor Vehicle 13,000
General Reserve 10,500 Stock 15,000
Sundry Creditors 15,000 Sundry Debtors 11,000
Bills Payable 2,000
92,500 92,500
Gopi retired on 1st April, 2018 and following terms were agreed upon:
(i) Goodwill of the firm is to be valued at 21,000.
(ii) The assets and liabilities are to be valued as under: Stock 12,000; Sundry Debtors 10,500; Land and Building
22,600; Plant and Machinery 25,000 and Sundry Creditors ¹ 14,000.
(iii) Krishan and Ram introduced 20,000 and 5,000 respectively into the business and 16,200 were to be paid to Gopi.
The balance due to Gopi was to be paid in three equal annual instalments along with interest @ 9% p.a.
Prepare Revaluation Account, Partners' Capital Accounts, Balance Sheet of the firm after Gopi's retirement and Gopi's
Loan Account until it is paid.

Solution

Illustration 34.
X, Y and Z were partners in a firm with profit-sharing ratio of 1/2, 1/3 and 1/6 respectively. The Balance
Sheet of the firm as at 31st March, 2021 was as follows:
Trade Creditors 2,10,000 Cash at Bank 57,500
Workmen Compensation Reserve 1,20,000 Debtors 4,00,000
Employees' Provident Fund 60,000 Less: Provision for Doubtful Debts 20,000 3,80,000
Investments Fluctuation Reserve 60,000 Stock 3,76,500
Capital A/cs: Investments (Market value 1,76,000) 1,50,000
X 6,80,000 Patents 1,00,000
Y 3,20,000 Machinery 5,00,000
Z 2,10,000 12,10,000 Advertisement Expenditure 36,000
Goodwill 60,000
16,60,000 16,60,000
Z retired on 1st April, 2021 on the following terms:
(i) Goodwill of the firm is valued at 3,00,000.
(ii) Value of Patents is to be reduced by 20% and that of Machinery to 90%.
(iii) Provision for Doubtful Debts is to be raised to 6%.
(iv) Liability for Workmen Compensation to the extent of 60,000 is to be created.
(v) Z took the Investments at market value.
(vi) Amount due to Z is to be settled on the following basis:
50% on retirement, 50% of the balance within one year and the balance by a bill of exchange (without interest) at 3
months. You are required to show entries for the treatment of Goodwill, Revaluation Account, Partners' Capital Accounts
and the Balance Sheet of X and Y after Z's retirement.
Solution

07
Death of a
Partner

Meaning
Partnership comes to an end on the death of a partner but the firm

may continue its business with the remaining partners who take
share of the deceased partner in their old profit-sharing ratio or in
the ratio as decided by them.

Meaning
The accounting process on the death of a partner is same as that

of retirement of a partner. The differences between the two
situations are:
(i) Retirement of a partner is voluntary in nature and it can be planned,
whereas death of a partner cannot be planned.
(ii) Payment of the amount due is made to the retiring partner in case of
retirement of a partner, whereas due amount is paid to the legal heirs of the
deceased partner, in case of death of a partner.

Adjustments required to be made at the time of death of a partner are:
1. Determining New Profit-sharing Ratio and Gaining Ratio.
2. Valuation and Adjustment of Goodwill.
3. Revaluation of Assets and Reassessment of Liabilities.
4. Reserves and Undistributed Profits (Accumulated Profits)/Losses.
5. Determination and Payment of amount due to Deceased Partner.
6. Payment to the Deceased Partner's Legal Heirs or Executors of his estate.

SHARE OF PROFIT
OR LOSS IN THE
YEAR OF DEATH

Meaning
Deceased partner is entitled to his share in profit from the beginning

of the accounting year up to the date of his death. Similarly, he bears
loss, if any incurred by the firm during this period.

Journal Entries
(i) If profit-sharing ratio of the remaining or continuing partners does not change:
(a) When Deceased Partner's Share is Profit:

Profit and Loss Suspense A/c Dr.
To Deceased Partner's Capital A/c
The balance of Profit and Loss Suspense Account is shown in the assets side of the Balance
Sheet and is transferred to the debit of Profit and Loss Appropriation Account at the end of the
year.
(b) When Deceased Partner's Share is Loss:

Deceased Partner's Capital A/c Dr.
To Profit and Loss Suspense A/c
The balance of Profit and Loss Suspense Account is shown in the liabilities side of the Balance
Sheet and is transferred to the credit of Profit and Loss Appropriation Account at the end of the
year.
Journal Entries
(ii) If profit-sharing ratio of the remaining or continuing partners changes:
(a) When Deceased Partner's Share is Profit:
Profit and Loss Suspense A/c Dr.
Later, the balance of Profit and Loss Suspense Account is transferred to the gaining partners
in their gaining ratio.
The Journal entry passed is:

To Profit and Loss Suspense A/c
Alternatively, following Journal entry may be passed at the time of death of a partner:

Calculation of
Share of Profit

Meaning
Deceased Partner's share of profit or loss from the beginning of the

financial year up to the date of death can be either
(a) Determined by preparing the final accounts (Profit and Loss

Account, Profit and Loss Appropriation Account and Balance
Sheet) or
(b) Estimated on the basis of time or on the basis of turnover or
sales.

(a) When Share of
Profit or Loss is
determined by
preparing final
accounts

(a) When Share of Profit or Loss is determined by preparing final accounts
The firm prepares the final accounts in the same manner as the accounts are
prepared at the year end. As a result, actual profit of the firm for the period is
determined and the profit share of deceased partner is determined.
Net Profit, as per the Profit and Loss Account is transferred to Profit and Loss
Appropriation Account.
Profit, so determined, is appropriated to partners as per the Partnership Deed.
The Journal entry for the appropriation of profit is:

Profit and Loss Appropriation A/c Dr.
To Partners' Capital A/cs

Illustration 01.
Aman, Barun and Charu were partners sharing profits in the ratio of 5: 3:2.
Barun died on 30th September, 2020 and Aman and Charu decided to continue
business sharing profits equally. In terms of the Partnership Deed, accounts
were prepared as on 30th September, 2020. Profit for the period up to 30th
September, 2020 was determined at 9,00,000. Pass the Journal entry
distributing the profit for the period of six months ended 30th September,
2020.

(b) When share of
profit or loss is
estimated

(b) When share of profit or loss is estimated
(i) On the basis of time; or
(ii) On the basis of turnover or sales

(i) On the basis of time; or
If time basis is used, the profit is assumed to has arisen uniformly over the year.
Suppose, profit for the previous year is 24,000 and a partner dies after two months
of the close of previous year. Profit for the two months will be 4,000 (i.e., 24,000 x
2/12). If the deceased partner took 3/10th share of profits, his share of profit till the
date of death will be 1,200 (3/10th of 4,000).
The deceased partner's share of profit is calculated as is agreed among all the
partners.
It may be calculated on the basis of previous year's profit alone or on the basis of
average profit of certain years.

Illustration 02 (Profit-sharing Ratio of Continuing Partners does not Change).
Raman, Daman and Karan were partners sharing profits in the ratio of 3: 2: 1.
Daman died on 30th June, 2021. Raman and Karan decided to continue the
business. Share of profit or loss of the deceased partner from the beginning of
the year up to the date of death was to be determined on the basis of last
year's profit, which was 3,60,000.
Pass necessary Journal entry to record Daman's share of profit/loss up to the
date of death.

Illustration 03 (Profit-sharing Ratio of Continuing Partners does not Change).
Sanjay, Ajay and Karan were partners sharing profits in the ratio of 3: 2:1.
Karan died on 31st July, 2021. Sanjay and Karan decided to continue the
business. Share of profit or loss of the deceased partner from the beginning of
the year up to the date of death was to be determined on the basis of last
year's profit. Last year's loss was 1,80,000.
Pass necessary Journal entry to record Karan's share of profit/loss up to the
date of death.

Illustration 04 (Calculation of Profit till the date of death).
Ram, Manohar and Param were partners in a firm. Param died on 29th
February, 2021. His share of profit from the closure of the last accounting year
till the date of death was to be calculated on the basis of the average of three
completed years of profits before death. Profits for the years ended 31st
March, 2018, 2019 and 2020 were 80,000, 90,000 and 1,00,000 respectively.
Calculate Param's share of profit till his death and pass Journal entry for the
same when:
(i) profit-sharing ratio of remaining partners does not change; and
(ii) profit-sharing ratio of remaining partners changes and new ratio being 3: 2.

Illustration 05 (Profit-sharing Ratio of Continuing Partners Changes).
Amar, Bhuwan and Chaman were partners sharing profits and losses in the
ratio of 3: 2:1. Bhuwan died on 30th June, 2021. Loss from the beginning of the
accounting year till the date of his death was estimated at 1,80,000. Amar and
Chaman decided to share future profits in the ratio of 3: 2 w.e.f. 1st July, 2021:
Pass the necessary Journal entries to record Bhuwan's share of profit/loss up

to the date of death.

(ii) On the basis of turnover or sales
If profit or loss of the deceased partner till the date of his death is to be determined
on the basis of sales or turnover, we should know
(a) Sales for the previous accounting year and
(b) Sales up to the date of death.
It is assumed that profit has arisen uniformly during the year.

For example, A partner dies on 1st June, 2021; accounts being closed on 31st March
each year. Profit till the date of death will be determined on the basis of sales, assuming
profit for the year ended 31st March, 2022 will be same as for the year ended 31st
March, 2021. The following information is available:
Sales for the year ended 31st March, 2021 12,00,000

Profit for the year ended 31st March, 2021. 2,40,000
Sales of April and May, 2021 3,00,000
Rate of Profit to Sales Profit/Sales x 100 = 2,40,000/ 12,00,000 x 100 = 20%

Estimated Profit on the basis of Sales for April and May, 2021=20% of 3,00,000=60,000
If the deceased partner was entitled to 1/4th share of profits, his estate shall be credited
by 15,000* for profit till the date of death.
*Deceased Partner's Share of Profit= Last Year's Profit/ Last Year's Sales x Sales till Date of Death x Profit Share
*2,40,000 / 12,00,000 x 3,00,000 x ¼ = 15,000.

Illustration 06 (Profit up to the date of Death on the Basis of Turnover).
A, B and Care sharing profits in the ratio of 2:2: 1. B died on 30th June, 2021.
Books of account are closed on 31st March each year. Sales for the year ended
31st March, 2021 was 3,00,000. Sales of 1,00,000 amounted between the
period from 1st April, 2021 to 30th June, 2021. Profit for the year ended 31st
March, 2021 was 30,000.
Calculate deceased partner's share in the profit of the firm.

Illustration 07 (Loss up to the Date of Death on the Basis of Turnover).
Veer, Dharam and Karam were partners sharing profits and losses in the ratio
of 3 : 2 : 1. Dharam died on 30th September, 2020. Accounts of the firm are
closed on 31st March every year. Sales for the year ended 31st March, 2020
was 6,00,000 and sales for the six months ended 30th September, 2020 was
3,00,000. Loss for the year ended 31st March, 2020 was * 60,000. Calculate
deceased partner's share of profit/loss from the beginning of the accounting
year up to 30th September, 2020.

Section 37 of Indian
Partnership Act, 1932

Section 37 of Indian Partnership Act, 1932
As per Section 37 of the Indian Partnership Act, 1932, if full or part amount of
outgoing partner still remains to be paid then:
(a) he will be entitled to interest or share in profits. If it is mutually agreed among

partners that interest or share in profit will not be paid, no amount shall be payable.
(b) if there is no agreement among the partners, then outgoing partner or his
representatives have the choice to get either of the following till final settlement:
(i) Interest @ 6% p.a. on the (ii) Share in the profit earned

balance amount.
OR proportionate to his amount
(Whichever is Higher) outstanding to total capital.

Section 37 of Indian Partnership Act, 1932
Share in Profit =
Outstanding Amount of Outgoing Partner
÷
(Capital of all Partners + Balance of Outgoing Partner)
x
Profit from the date of death or retirement of a partner till the date of next
Balance Sheet

Illustration 20.
Lal, Bal and Pal were partners sharing profits and losses in the ratio of 4: 3:2.
Pal died on 1st July, 2020 on which date the capitals of Lal, Bal and Pal after
all necessary adjustments stood at 75,000; * 65,000 and 45,000 respectively.
Lal and Bal continued to carry on the business for 6 months without settling
the account of Pal. During the period of 6 months ended 31st December, 2020,
a profit of 50,000 is earned by the firm.
State which of the two options available with Pal's Executor under Section 37
of the Indian Partnership Act, 1932 should be exercised?

Thankyou

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Chapter 6

Retirement & Death

Your Accounts Best Friend

Your Accounts Best Friend

Partnership is the result of an agreement between persons for

Any change in the partnership agreement brings to an end the

The change in the agreement results in changes in the

In such a case, although the firm continues, it amounts to the

(i) Change in the profit-sharing ratio among the existing partners.

(ii) Admission of a partner or partners.

(iii) Retirement of a partner.

(iv) Death of a partner.

(v) Amalgamation of two or more partnership firms.

Your Accounts Best Friend

Your Accounts Best Friend

Retirement of a partner means the retiring partner does not remain

Your Accounts Best Friend

A partner may retire from the firm:

Your Accounts Best Friend

Liability for the Acts before Retirement

Liability for the Acts after Retirement

Your Accounts Best Friend

1. Determining New Profit-sharing Ratio and Gaining Ratio.

2. Valuation and Adjustment of Goodwill.

3. Revaluation of Assets and Reassessment of Liabilities.

4. Reserves and Undistributed Profits (Accumulated Profits)/Losses.

5. Determination and Payment of amount due to Retiring Partner.

Your Accounts Best Friend

Your Accounts Best Friend

As a result of retirement of a partner, profit-sharing ratio among

After retirement of the partner, new profit-sharing ratio of the

Your Accounts Best Friend

New profit-sharing ratio on retirement of a partner is the ratio in

Your Accounts Best Friend

New profit share of each remaining or continuing partner is the

It may be expressed as,

Your Accounts Best Friend

New Profit-sharing Ratio, upon retirement, may have to be

1. The new profit-sharing ratio is not given; and

Your Accounts Best Friend

When a partner retires and new profit-sharing ratio among the

Your Accounts Best Friend

Your Accounts Best Friend

Your Accounts Best Friend

Your Accounts Best Friend

Your Accounts Best Friend

Your Accounts Best Friend

Your Accounts Best Friend

Gaining ratio is determined because the gaining partner or partners compensate

Your Accounts Best Friend

1. When information is not given or Agreement does not exist.

Your Accounts Best Friend

Situation 1. When information is not given or When Agreement Does

In the absence of an agreement, it is assumed that after retirement of

Your Accounts Best Friend

Illustration 5 (New Profit-sharing Ratio and Gaining Ratio).

Your Accounts Best Friend

Illustration 5 (New Profit-sharing Ratio and Gaining Ratio).

Your Accounts Best Friend

Situation 2. When New Profit-sharing Ratio is Given

In this case, gain of each continuing partner is calculated by deducting

Your Accounts Best Friend

Your Accounts Best Friend