CBSE Class 12 Retirement or Death of a Partner. Learning the important concepts is very important for every student to get better marks in examinations. The concepts should be clear which will help in faster learning. The attached concepts made as per NCERT and CBSE pattern will help the student to understand the chapter and score better marks in the examinations.

CHAPTER 5

Retirement/Death of a Partner

Introduction

Like admission and change in profit sharing ratio, in case of retirement or death also the existing partnership deed comes to an end and the new one comes into existence among the remaining partners. There is not much difference in the accounting treatment at the time of retirement or in the event of death.

 Amount due to retiring deceased Partner

(To be credited to his capital account)

1. Credit Balance of his capital.

2. Credit Balance of his current account (if any)

3. Share of Goodwill.

4. Share of Reserves or Undistributed profits.

5. His share in the profit revaluation of assets and liabilities.

6. Share in profits upto the date of Retirement/Death.

7. Interest on capital if involved.

8. Salary if any

Deduction from the above sum (to be debited to the capital account)

1. Debit balance of his current account (if any)

2. Share of Goodwill to be written off.

3. Share of Accumulated loss.

4. Drawings and interest on drawings (if any)

5. Share of loss on account of Revaluation of assets and liabilities.

6. His share of business loss.

Accounting Treatement

1. Calculation of new profit sharing ration and gaining ratio

2. Treatment of goodwill.

3. Revaluation a/c preparation with the adjustment in the respect of unrecorded assets/ liabilities.

4. Distribution of reserves and accumulated profits/loss.

5. Ascertainment of share of profits/loss till the date of retirement/death.

6. Adjustment of capital if required

7. Settlement of the Accounts due to Retired/Deceased partner.

New Profit Sharing Ratio & Gaining Ratio

New Profit Sharing Ratio It is the ratio in which the remaining partners will share further profits after retirement/death.

Gaining ratio It is the ratio in which the continuing partners have acquired the share from the outgoing partner Calulation of the two ratios Following situations may arise.

1. When no information about new ratio or gaining ratio is given in the question  In this case it is considered that the share of the retiring partner is acquired by the remaining partners in the old ratio. Then no need to calculate the new ratio/gaining ratio as it will be the same as before.

Example 1 :A

Band C are partners sharing profit and loss in the ratio of 3:2:1 then on retirement of the gaining ratio/new ratio will be

A2: 1

B3: 1

C3: 2

2. Gaining ratio is given which is different than the old ratio In this case

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