Q.R, S and T are partners sharing profits in the ratio 5:3:2. Their capitals as on 31st March are R Rs 1,50,000; S Rs 1,00,000; and T Rs 80,000. On this date, T retires on the following terms:

The final amount due to a retiring partner is arrived at by starting from their existing capital and adding every credit they are entitled to — goodwill, revaluation profit and reserves — before deciding how much is paid in cash and how much is carried forward as a loan. …

Step 1 — T's share of goodwill. T's old share = 2/10 = 1/5. T's share of goodwill = 1/5 × Rs 1,00,000 = Rs 20,000, funded by R and S in their gaining ratio 3:2: R = 3/5 × 20,000 = Rs 12,000; S = 2/5 × 20,000 = Rs 8,000.

Step 2 — Revaluation profit, shared in the OLD ratio 5:3:2 (10 parts).

Step 3 — General Reserve Rs 25,000, shared in the same old ratio 5:3:2.

Step 4 — T's Capital Account.

A common error is crediting T with goodwill calculated using the GAINING ratio instead of T's own OLD share of the total goodwill, or sharing the revaluation profit/reserve in the gaining ratio instead of the old ratio — …