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Question
What are the different ways in which a partner can retire from the firm?
Solution
The following are the different ways in which a partner can retire from a firm.
i. With the consent of all other partners: A partner must take the consent of all the co-partners of the firm before his/her retirement. Thereafter, the partner can retire from the firm if and only if all the partners agree on the decision of his/her retirement.
ii)With an express agreement by all the partners: In case of written agreement among the partners a partner may retire from the firm by expressing his/her intention of leaving the firm though a notice to the other partners of the firm.
iii) By giving a written notice: If partnership among the partners is at will then a partner may retire by giving notice in writing to all the other partners informing them about his/her intention to retire.
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RELATED QUESTIONS
Why a retiring/deceased partner is entitled to a share of goodwill of the firm?
How will you compute the amount payable to a deceased partner?
Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs 36,000 and Profit and Loss Account (Dr.) Rs 15,000.
Pass the necessary journal entries to the above effect.
Radha, Sheela and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2019, Sheela retires from the firm. On that date, their Balance Sheet was as follows:
| Liabilities | Amt (Rs.) |
Amt (Rs.) |
Assets | Amt (Rs.) |
| Trade Creditors | 3,000 | Cash-in-Hand | 1,500 | |
| Bills Payable | 4,500 | Cash at Bank | 7,500 | |
| Expenses Owing | 4,500 | Debtors | 15,000 | |
| General Reserve | 13,500 |
Stock |
12,000 | |
| Capitals: | 45,000 | Factory Premises | 22,500 | |
| Radha | 15,000 | Machinery | 8,000 | |
| Sheela | 15,000 | Losse Tools | 4,000 | |
| Meena | 15,000 | |||
| 70,500 | 70,500 |
The terms were:
a) Goodwill of the firm was valued at Rs 13,500.
b) Expenses owing to be brought down to Rs 3,750.
c) Machinery and Loose Tools are to be valued at 10% less than their book value.
d) Factory premises are to be revalued at Rs 24,300.
Prepare:
1. Revaluation account
2. Partner’s capital accounts and
3. Balance sheet of the firm after retirement of Sheela.
Pankaj, Naresh and Saurabh are partners sharing profits in the ratio of 3:2:1. Naresh retired from the firm due to his illness on September 30, 2017. On that date the Balance Sheet of the firm was as follows:
Books of Pankaj, Naresh and Saurabh
Balance Sheet as on September 30, 2017
|
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|||
|
General Reserve |
12,000 |
Bank |
7,600 |
|||
|
Sundry Creditors |
15,000 |
Debtors |
6,000 |
|
||
|
Bills Payable |
12,000 |
Less:Provision for Doubtful Debt |
400 |
5,600 |
||
|
Outstanding Salary |
2,200 |
|
|
|||
|
Provision for Legal Damages |
6,000 |
Stock |
9,000 |
|||
|
Capitals: |
|
Furniture |
41,000 |
|||
|
Pankaj |
46,000 |
|
Premises |
80,000 |
||
|
Naresh |
30,000 |
|
|
|
||
|
Saurabh |
20,000 |
96,000 |
|
|
||
|
|
1,43,200 |
|
1,43,200 |
|||
Additional Information:
- Premises have appreciated by 20%, stock depreciated by 10% and provision for doubtful debts was to be made 5% on debtors. Further, provision for legal damages is to be made for Rs 1,200 and furniture to be brought up to Rs 45,000.
- Goodwill of the firm be valued at Rs 42,000.
- Rs 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained from Bank.
- Naresh share of profit till the date of retirement is to be calculated on the basis of last year’s profit, i.e., Rs. 60,000.
- New profit sharing ratio of Pankaj and Saurabh is decided to be 5:1.
Give the firm's necessary ledger accounts and balance sheet after Naresh’s retirement.
Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs. 36,000 and Profit and Loss Account (Dr.) Rs. 15,000. Pass the necessary journal entries to the above effect.
Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following : General Reserves Rs. 36,000 and Profit and Loss Account (Dr) Rs. 15,000. Pass the necessary journal entries to the above effect.
