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Reconstitution of Partnership : Retirement of a Partner

ICSE · Class 12 · Accountancy

Complete topic list for Reconstitution of Partnership : Retirement of a Partner in ICSE Class 12 Accountancy. Key concepts, sub-topics, and what to focus on for board exams.

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4 Topics · ICSE Class 12 Accountancy

Topics in Reconstitution of Partnership : Retirement of a Partner

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I. New Profit Sharing Ratio of Continuing Partners

  • New profit sharing ratio is the ratio in which remaining partners will share profits after the retirement of a partner.
  • New Share = Old Share + Acquired Gaining Share
  • Case 1: If nothing is mentioned about new ratio — simply cancel the retiring partner's share from the old ratio. The remaining partners' old ratio becomes the new ratio.
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II. Gaining Ratio of Continuing Partners

  • Gaining Ratio is the ratio in which the continuing partners have acquired the share of the retiring/deceased partner.
  • Formula: Gaining Ratio = New Ratio - Old Ratio
  • Case 1: New ratio not given — gaining ratio = old ratio of remaining partners.
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III. Accounting Treatment of Goodwill

  • A retiring partner is entitled to his share of goodwill because the firm's goodwill was built by all partners including him.
  • As per Accounting Standard 26, only purchased goodwill can be recorded. Therefore, goodwill account cannot be raised in the books.
  • Adjustment is done through capital accounts: Gaining partners' capital accounts are debited in gaining ratio, and retiring partner's capital account is credited.
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IV. Accounting Treatment of Revaluation of Assets and Liabilities

  • At the time of retirement, assets and liabilities are revalued so that the retiring partner gets his fair share.
  • A Revaluation Account (also called Profit and Loss Adjustment Account) is prepared.
  • Increase in asset value / Decrease in liability value → Credit side of Revaluation Account (gain).

Key Concepts

Retirement occurs when a partner leavesWhen a partner retiresThe gaining ratio represents the proportionGoodwill represents the reputation and earningAssets and liabilities must be revalued

Frequently Asked Questions

What are the important topics in Reconstitution of Partnership : Retirement of a Partner for ICSE Class 12 Accountancy?
Reconstitution of Partnership : Retirement of a Partner covers several key topics that are frequently asked in ICSE Class 12 board exams. Focus on the core concepts listed on this page and practise related questions to build confidence.
How to score full marks in Reconstitution of Partnership : Retirement of a Partner — ICSE Class 12 Accountancy?
Start by understanding all key concepts. Practise previous year questions from this chapter. Revise formulas and definitions regularly. Use flashcards for quick revision before the exam.

Sources & Official References

Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.

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