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Question
What is meant by the retirement of a partner?
Solution
When a partner leaves from partnership firm it is known as retirement. The reasons for the retirement of a partner may be illness, old age, and disagreement with other partners, etc.
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| Liabilities | ₹ | Assets | ₹ | |
| Capital accounts: | Buildings | 90,000 | ||
| Kannan | 1,00,000 | 2,20,000 | Machinery | 60,000 |
| Rahim | 80,000 | Debtors | 30,000 | |
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| 2,70,000 | 2,70,000 |
John retires on 1st January 2018, subject to the following conditions :
- To appreciate building by 10%
- Stock to be depreciated by 5%
- To provide ₹ 1,000 for bad debts
- An unrecorded liability of ₹ 8,000 has been noticed.
- The retiring partner shall be paid immediately.
Prepare revaluation account, partner’s capital account, and the balance sheet of the firm after retirement.
