Retirement and Death of a Partner — Part 2: Settlement, Loan, Balance Sheet and Death: visual lesson, CBSE Class 12 Accountancy

Lesson

Settling the account of an outgoing partner

Part 2 — the amount due, payment and loan, the new balance sheet, capital adjustment, and the death of a partner.

In this lesson you will

Prepare the capital accounts and find the amount due to the outgoing partner
Prepare the retiring partner’s loan account and the balance sheet of the reconstituted firm
Adjust continuing partners’ capitals to the new ratio
Calculate a deceased partner’s profit till death and prepare the executor’s account

Part 2 at a glance

Concept

Balance of the capital account = amount due.
Credited to the outgoing partner's capital	Debited to the outgoing partner's capital
Opening capital (and current account credit balance)	Drawings (and current account debit balance)
Share of goodwill from the gaining partners	Share of goodwill written off, if it was in the books
Share of revaluation profit	Share of revaluation loss
Share of reserves and accumulated profits	Share of accumulated losses
Interest on capital, salary, commission, profit till death (if any)	Interest on drawings (if any)

Worked example

Using worked examples 3 to 5: Chirag is paid ₹46,600 by bank and the rest is left as a loan.

Amount due to Chirag ₹1,46,600.
Dr: Particulars	Arjun	Bela	Chirag	Cr: Particulars	Arjun	Bela	Chirag
To Goodwill A/c (written off)	15,000	9,000	6,000	By Balance b/d	2,00,000	1,50,000	1,00,000
To Chirag's Capital A/c	18,000	18,000	—	By Revaluation A/c	12,500	7,500	5,000
To Bank A/c	—	—	46,600	By General Reserve A/c	25,000	15,000	10,000
To Chirag's Loan A/c	—	—	1,00,000	By Workmen Compensation Reserve A/c	4,000	2,400	1,600
To Balance c/d	2,08,500	1,47,900	—	By Arjun's Capital A/c	—	—	18,000
				By Bela's Capital A/c	—	—	18,000
Total	2,41,500	1,74,900	1,52,600	Total	2,41,500	1,74,900	1,52,600