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Notes Chapter 3

The document provides revision notes on the retirement and death of a partner in a partnership firm, outlining key concepts such as retirement, expulsion, gaining ratio, and the legal representative's role. It details the accounting treatment of goodwill and the calculation of amounts payable to retiring or deceased partners, including payment methods and joint life policies. Additionally, it explains the circumstances under which a partner can retire and the necessary accounting entries involved.

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10 views3 pages

Notes Chapter 3

The document provides revision notes on the retirement and death of a partner in a partnership firm, outlining key concepts such as retirement, expulsion, gaining ratio, and the legal representative's role. It details the accounting treatment of goodwill and the calculation of amounts payable to retiring or deceased partners, including payment methods and joint life policies. Additionally, it explains the circumstances under which a partner can retire and the necessary accounting entries involved.

Uploaded by

namanchopra89
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

ARIHANT COMMERCE ACADEMY

BARNAGAR ,DIS. UJJIAN

ACCOUNTANCY REVISION NOTES FOR MP BOARD

CHAPTER- 3

RETIREMENT /DEATH OF A PARTNER

# Retirement of partner:

1) When a partner ceases to be a partner of the firm.

2) The old partnership ends and new partnership comes into existence.

# Expulsion of partner :

when a partner is forcefully removed from the firm for any act opposite to the
partnership agreement.

# Gaining ratio:

The ratio in which continuing partner gains share from the retiring partner.

# profit and loss adjustment account:

1) It is just like revaluation account.

2) prepared to revalue asset and reassess liability.

3) Profit or loss is distributed to all partners in old ratio.

# Legal representative

A person who has all the rights of deceased partner .he gets the amount due to
deceased partner.
# Executor:

A person who has been given the responsibility of settling the accounts of
deceased partner

# circumstances of retirement of a partner

1) consent: when all the remaining partners give their consent partners give their
consent

2) Express agreement: when there is an express agreement related to retirement


of the partner.

3) Notice: when partnership is at will; partner can retire by giving notice in


writing.

# ways of payment of amount due to retiring partner:

1) Payment in cash: if sufficient cash is available with the firm, then the payment
is made in cash

2) Payment in installment: when the firm does not have sufficient amount in
cash, it can pay the amount in installments.

3) Payment by annuity: if the payment is made by annuity , an annuity suspense


account is opened.

# accounting treatment of goodwill:

The outgoing/retiring partner’s capital account is credited and continuing or


gaining partners capital account is debited in gaining ratio.

Journal entry:

Gaining partner capital a/c dr

To retiring partner capital a/c


# calculation of amount payable to retiring or deceased partner:

items to be credited items to be debited

interest on capital
drawings and interest on drawings
share of capital

salary ,commission bonus (if any)


share of undistributed losses
loan given to the firm and interest on
loan

share in reserve fund and undistributed


profits
loan taken and interest on loan taken
share in goodwill premium

# joint life policy:

1) A firm take joint life policy for getting sufficient cash on the death of a partner
to pay his legal representative without affecting the business of the firm .

2) premium paid on JLP is debited to profit and loss a/c

3) when amount of JLP is received ,it is credited to all partners in their profit
sharing ratio .

NAMAN CHOPRA
[Link],[Link] ,CA-IPCC
6264662774

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