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Accountancy · Class 12 Commerce

Ch 6Retirement and Death of a Partner — Class 12 Accountancy, concept-first.

When a partner retires or dies, the firm does not automatically come to an end — the remaining partners usually continue the business, and the firm is said to be reconstituted.

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Meaning of Retirement and Death of a Partner

Retirement is the voluntary withdrawal of a partner, with consent or as provided in the deed, while the firm continues; death is the involuntary, automatic end of a partner's membership on his or her death, which can occ…

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Chapter contents

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1

Meaning of Retirement and Death of a Partner

When a partner retires or dies, the firm does not automatically come to an end — the remaining partners usually continue the business, and the firm is said to be reconstituted.

2

New Profit-Sharing Ratio and Gaining Ratio

Once a partner retires or dies, his or her share of profit does not disappear — it is acquired by the remaining partners, who now share the whole of future profits between themselves.

3

Treatment of Goodwill on Retirement or Death of a Partner

Goodwill built up by a firm belongs to all the partners who worked to create it, in their existing profit-sharing ratio.

4

Revaluation of Assets and Liabilities

Assets and liabilities are revalued at the time a partner retires or dies so that the outgoing partner receives (or bears) a fair share of any gain or loss in their values that has arisen while he or…

5

Adjustment of Accumulated Profits, Reserves and Losses

A firm's Balance Sheet often carries undistributed past profits — a General Reserve, a credit balance of the Profit and Loss Account, or a Workmen Compensation Reserve in excess of any actual claim ag…

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Settlement of the Retiring or Deceased Partner's Claim

After all the adjustments in Sections 2–5 are made, the firm arrives at the total amount finally due to the outgoing partner:

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Questions for Practice

This set of questions checks your understanding of retirement and death of a partner — new ratio and gaining ratio, treatment of goodwill, revaluation of assets and liabilities, adjustment of reserves…

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 25 questions25 questions
  1. Q1X, Y and Z were partners sharing profits and losses equally. X died on 1st April 2019. Find out the share of X in the profit of 2019 based o…Preview
  2. Q2On retirement of a partner from a partnership firm, accumulated profits and losses are distributed to the partners in the : (a) Sacrificing…Preview
  3. Q3(a) Charles, Muthu and Sekar are partners, sharing profits in the ratio of 3 : 4 : 2. Their balance sheet as on 31st December, 2018 is as un…Preview
  4. Q4What is meant by retirement of a partner ?Preview
  5. Q5(a) (i) Kayal, Mala and Neela are partners sharing profits in the ratio of 2 : 2 : 1. Kayal retires and the new profit sharing ratio between…Preview
  6. Q6A, B, C are partners sharing profits and losses in the ratio of 4 : 2 : 3. 'A' retires. The new profit sharing ratio between B and C will be…Preview
  7. Q7On retirement of a partner, General Reserve is transferred to the : (a) Capital account of the continuing partners (b) Capital account of al…Preview
  8. Q8If the final amount due to a retiring partner is not paid immediately, it is transferred to : (a) Retiring partner's Loan A/c (b) Bank A/c (…Preview
  9. Q9Give the journal entry to be passed to transfer the amount due to the deceased partner to the executor of the deceased partner.Preview
  10. Q10Vivin, Hari and Joy are partners sharing profits and losses equally. On 31-3-2017 Hari retired. On the date of retirement, the books of the…Preview
  11. Q11(a) Naresh, Mani and Muthu are partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. On 31st March 2019, Muthu retires fr…Preview
  12. Q12A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. On retirement of B, goodwill of the firm was valued as ₹ 30,000. Find the…Preview
  13. Q13On retirement of a partner from a partnership firm, accumulated profits and losses are distributed to the partners on the basis of : (a) Gai…Preview
  14. Q14Dheena, Surya and Janaki are partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31.3.2018, Dheena retired. On the date of ret…Preview
  15. Q15List out the adjustments made at the time of retirement of a partner in a partnership firm.Preview
  16. Q16A, B and C are partners sharing profits in the ratio of 4 : 2 : 3. C retires. The new profit sharing ratio between A and B will be : (a) 3 :…Preview
  17. Q17If the final amount due to a retiring partner is not paid immediately, it is transferred to : (a) Retiring Partner's Loan A/c (b) Bank A/c (…Preview
  18. Q18What is meant by retirement of a partner ?Preview
  19. Q19Distinguish between Sacrificing ratio and Gaining ratio.Preview
  20. Q20(a) Vijaya, Kavitha and Roseline are partners who share profits and losses in their Capital ratio. Their Balance Sheet as on 31.12.2017 is a…Preview
  21. Q21On retirement of a partner, general reserve is transferred to the : (a) Capital account of the continuing partners (b) Capital account of al…Preview
  22. Q22A partner retires from the partnership firm on 30th June. He is liable for all the acts of the firm up to the : (a) Date of his retirement (…Preview
  23. Q23A, B and C are partners sharing profits and losses in the ratio of 5 : 3 : 2. On 31.3.2019, 'A' retired. On the date of retirement, the book…Preview
  24. Q24Kavin, Madhan and Ranjith are partners sharing profits and losses in the ratio of 4 : 3 : 3 respectively. Kavin retires from the firm on 31s…Preview
  25. Q25(a) Vivek, Vishal, and Vimal are partners in a firm sharing Profits and Losses equally. Their Balance Sheet as on 31st March, 2018 is as fol…Preview

More questions

+Show 10 questions10 questions
  1. Q1Distinguish between retirement of a partner and death of a partner.Free
  2. Q2X, Y and Z share profits in the ratio 3 : 2 : 1. Y retires, and it is agreed that in future X and Z will share profits in the ratio 5 : 3. C…Free
  3. Q3What is Gaining Ratio? Why is it computed on the retirement or death of a partner?Free
  4. Q4Using the data of Question 2 (X, Y, Z sharing 3 : 2 : 1; Y retires; gaining ratio of X and Z is 3 : 5), pass the journal entry for treatment…Preview
  5. Q5Why is a Goodwill Account not raised in the books at its full value on the retirement or death of a partner? How, then, is the outgoing part…Preview
  6. Q6Ravi, Suresh and Mahesh share profits in the ratio 5 : 3 : 2. On Suresh's retirement, the partners agree to the following revaluation: Machi…Preview
  7. Q7Why are accumulated profits, reserves and losses distributed among all the partners, including the outgoing partner, in the OLD profit-shari…Preview
  8. Q8On the retirement of a partner, a firm's Balance Sheet showed a General Reserve of ₹60,000 and a debit balance of Profit and Loss A/c of ₹18…Preview
  9. Q9Geetha, a partner sharing 1/4th of the profits, dies on 30th June. The firm closes its books every 31st March, and its profit for the previo…Preview
  10. Q10Continuing the data of Questions 6 and 8 (Ravi, Suresh and Mahesh sharing 5 : 3 : 2; Suresh retires), Suresh's Capital Account showed a cred…Preview