Retirement and Death of a Partner

Lesson

Part 1 — new and gaining ratios, goodwill, revaluation and reserves when a partner leaves the firm.

In this lesson you will

Calculate the new ratio and the gaining ratio when a partner retires or dies
Adjust the outgoing partner’s share of goodwill under Accounting Standard 26
Prepare the Revaluation Account and distribute reserves and accumulated profits or losses

Part 1 at a glance

Compare

Retirement and death: one set of adjustments

Retirement

Death

Table comparing retirement and death: retirement is by choice and usually at the year end, with payment to the retiring partner; death can occur on any day, payment goes to the executor, and the share of profit till the date of death must be added; ratios, goodwill, revaluation, reserves and settlement are common to both
Basis	Retirement	Death
What happens	A partner leaves by choice, with notice or by agreement	A partner dies; the firm usually continues under the deed
Date	Usually the end of the accounting year	Any day of the year
Amount paid to	The retiring partner	His executor (legal representative)
Extra step	None	Share of profit from the start of the year to the date of death
Common steps	New and gaining ratios, goodwill, revaluation, reserves, settlement	The same

Concept

Do the adjustments in this order