Reconstitution of a Partnership Firm – Retirement/Death of a Partner
Nagaland Board · Class 12 · Accountancy
Summary of Reconstitution of a Partnership Firm – Retirement/Death of a Partner for Nagaland Board Class 12 Accountancy. Key concepts, important points, and chapter overview.
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When a partner retires or dies, the existing partnership firm undergoes reconstitution. This means the old partnership deed ends and a new one is created with the remaining partners continuing business under changed terms. The accounting treatment for retirement and death is similar, involving calcu
Key Concepts
The ratio in which remaining partners
The ratio in which remaining partners will share future profits after retirement/death of a partner. It consists of each partner's original share plus
The ratio in which continuing partners
The ratio in which continuing partners acquire the share from the retiring/deceased partner. Calculated as: New Share - Old Share for each continuing
The retiring/deceased partner is entitled
The retiring/deceased partner is entitled to their share of goodwill. When goodwill doesn't appear in books, continuing partners' capital accounts are
Assets and liabilities are revalued
Assets and liabilities are revalued to current market values at the time of retirement/death. A Revaluation Account is prepared to record gains/losses
Includes
Includes: capital account balance, current account credit balance, share of goodwill, accumulated profits, revaluation gains, profit up to retirement/
Learning Objectives
- Calculate new profit sharing ratio and gaining ratio of remaining partners after retirement/death
- Understand accounting treatment of goodwill during partner's exit
- Make necessary entries for unrecorded assets and liabilities
- Adjust accumulated profits and losses appropriately
- Determine the total claim of retiring/deceased partner against the firm
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