In any partnership firm when a partner retires from a firm it is the duty of remaining partner to give him his share because he has to spend his remaining life . So at this time accounting treatment is very necessary in the books of firm.
I am giving some tips for easy recording these transactions
I am giving some tips for easy recording these transactions
- Calculate new profit sharing ratio and calculate gaining ratio by deducting new profit sharing ratio from old ratio .
- Calculate profit or loss on revaluation of assets and liabilities and transfer it to retiring partner's capital account .
- Calculate the goodwill share of retiring partner and transfer to retiring partner's capital account ( credit side with his share)
- Calculate joint life policy share and transfer to retiring partner's capital account
- Calculate General reserve share and transfer to retiring partner's capital account
- In his debit side we will transfer his drawing and interest on his drawing after this we can give his capital after above adjustment in cash form or after this his amount will deemed as loan to firm . Firm will liable to give 6% interest to retiring partner . Make and retiring partner and calculate his total amount and give him .That is called accounting treatment of retirement of a partner .
