Accountancy

Class 12 CBSE

What is 'Retirement of a Partner'?

The cessation of a partner's membership in a partnership firm due to reaching a certain age, ill health, or other reasons.

What is 'Death of a Partner'?

The cessation of a partner's membership in the firm due to their demise. The legal representative of the deceased partner is entitled to their share.

What are the key adjustments required upon retirement or death of a partner?

1. Adjustment for Goodwill: Valuation and adjustment among remaining partners. 2. Revaluation of Assets and Liabilities: Recording changes in their values. 3. Accumulated Profits/Losses: Distribution among all partners (including retiring/deceased) in their old profit-sharing ratio. 4. Joint Life Policy: Treatment of policy, if any. 5. Capital Accounts Adjustment: Calculating the final amount due to the retiring/deceased partner.

Define 'Gaining Ratio' and its significance.

Gaining Ratio = New Share - Old Share. It is the ratio in which the continuing partners acquire the retiring/deceased partner's share and share the compensation for goodwill.