Retirement of a partner, Financial Accounting

Retirement of a partner

When one of the partners retires ante the others will continue trading, the n it is important that he gets a share of the goodwill that he helped create in addition to the total amounts due to him from the partnership.

To ensure that this objective is achieved, the following entries are normally passed in the partners capital accounts.

DR.    Goodwill
    CR.    Partners capital accounts

(With the value of goodwill to all the partners capital accounts according to old PSR)

To write off the goodwill:

DR.    Partners capital accounts
    CR.    Goodwill
(With the total value of goodwill and in only capital accounts of remaining partners using new PSR)



To get the total due to a retiring partner, we find out the balance in the current accounts and any loans advanced in the partnership and the balances in these accounts are transferred to the capital accounts.

Incase the partner has retired partway during the financial year, then we update the current account first with the partners share of the profits as per profit and loss appropriation account up to the date of retirement.

The partnership may not have sufficient cash to pay the retiring partner and thus may agree with the retiring partner that his total dues from the partnership be converted into a loan paying a certain interest per annum. However, if the partnership is able to pay the amount due, the retiring partner then the following entry is passed:

DR.    Retiring partners capital accounts
    Cr.     Cash book

Posted Date: 12/11/2012 6:18:26 AM | Location : United States







Related Discussions:- Retirement of a partner, Assignment Help, Ask Question on Retirement of a partner, Get Answer, Expert's Help, Retirement of a partner Discussions

Write discussion on Retirement of a partner
Your posts are moderated
Related Questions
What two components are used to compute the return on assets ?

Half secret trusts In this type of trust the will states that the gift is on trust, but the name of the beneficiary is not specified. Since the existence of a trust is disclose

To decide in what zone should be placed a store which sells video-cassettes, the manager of a firm which sells and rents cassettes makes a study to estimate the demand for each sto

Q. The capital investment appraisal techniques such as NPV, IRR, ARR, PV and Time value of money have become irrelevant post Celtic Tiger. Due to the depth of the recession comp

Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases given below: a. Jackson Corporation

Asch Experiments In these basics studies by Solomon Asch, groups of seven or 8 people were put in a classroom and shown two cards by the experimenter. The first card had a mai

t account for equipment beg, bal 80,000 disposal 22,000 acquisition-41,000 end bal. 99,600 acct. depreciation equip. disposa; 8,500 beg, bal 41,500

La Favorite Pastry Shop has been in business since 1985 and started with a large commercial oven that was built in 1955. Max, the owner is debating whether or not to purchase a new

LANDLORD'S RIGHT OF DISTRESS The Landlord's right to distrain for arrears of rent is not lost on the tenant's bankruptcy, but 1) Distress can only be levied after commencement

This subject has really beeen difficult for me. This is, by far, the most challenging assignment I have had to deal with. Please help! If someone can do it for me, that would be ev