Reconstitution of a Partnership Firm - Retirement/Death of a Partner

Distinguish between Gaining Ratio and Sacrificing Ratio in terms of:

1. Meaning
2. Effect on Partner’s Share of Profit
3. Mode of calculation
4. When to calculate

Anita, Jaya and Nisha are partners sharing profits and losses in the ratio of 1:1:1 Jaya retires from the firm. Anita and Nisha decided to share the profit in future in the ratio 4:3. Calculate the gaining ratio.

Azad, Vijay and Amit are partners sharing profits and losses in the proportion of 1/4, 1/8 and 10/16. Calculate the new profit sharing ratio between continuing partners if (a) Azad retires; (b) Vijay retires; (c) Amit retires.

Anu, Prabha and Milli are partners. Anu retires. Calculate the future profit sharing ratio of continuing partners and gaining ratio if they agree to acquire her share: (a) in the ratio of 5:3; (b) equally.

Rahul, Robin and Rajesh are partners sharing profits in the ratio of 3:2:1. Calculate the new profit sharing ratio of the remaining partners if (i) Rahul retires; (ii) Robin retires; (iii) Rajesh retires.

Puja, Priya, Pratistha are partners sharing profits and losses in the ratio of 5:3:2. Priya retires. Her share is taken by Priya and Pratistha in the ratio of 2:1. Calculate the new profit sharing ratio.

Ashok, Anil and Ajay are partners sharing profits and losses in the ratio of 1/2, 3/10 and 1/5. Anil retires from the firm. Ashok and Ajay decide to share future profits and losses in the ratio of 3:2. Calculate the gaining ratio.

Abhishek, Rajat and Vivek are partners sharing profits in the ratio of 5:3:2. If Vivek retires, the New Profit Sharing Ratio between Abhishek and Rajat will be–

The old profit sharing ratio among Rajender, Satish and Tejpal were 2:2:1. The New Profit Sharing Ratio after Satish’s retirement is 3:2. The gaining ratio is–

Anand, Bahadur and Chander are partners. Sharing Profit equally On Chander’s retirement, his share is acquired by Anand and Bahadur in the ratio of 3:2. The New Profit Sharing Ratio between Anand and Bahadur will be–

In the absence of any information regarding the acquisition of share in profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share:-

On retirement/death of a partner, the retiring/deceased partner’s capital account will be credited with

Gobind, Hari and Pratap are partners. On retirement of Gobind, the goodwill already appears in the Balance Sheet at Rs. 24,000. The goodwill will be written-off

Chaman, Raman and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires, the new profit sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at Rs. 1,00,000 Raman’s share of goodwill will be adjusted

On retirement/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio should compensate the

Vijay, Ajay and Mohan are friends. They passed B. Com. (Hons) from Delhi University in June, 2016. They decided to start the business of computer hardware. On 1st of August, 2016, they introduced the capital of Rs. 50,000, Rs. 30,000 and Rs. 20,000 respectively and started the business in partnership at Delhi. The profit sharing ratio decided between there was 4:2:1. The business was running successfully. But on 1st February, 2017, due to certain unavoidable circumstances and family circumstances, Ajay decided to settle in Pune and decided to retire from the partnership on 31st March, 2017; with the consent of partners, Ajay retires as on 31st March, 2017, the position of assets and liabilities are as follows: [Balance Sheet Data Provided] On the date of retirement, the following adjustments were to be made:

1. Firm’s goodwill was valued at Rs. 1,48,000.
2. Assets and Liabilities are to be valued as under: Stock Rs. 72,000; Land and Buildings Rs. 1,35,600; Debtors Rs. 63,000; Machinery Rs. 1,50,000; Creditors Rs. 84,000.
3. Vijay to bring Rs. 1,20,000 and Mohan Rs. 30,000 as additional capital.
4. Ajay was to be paid Rs. 97,200 in cash and the balance of his Capital Account to be transferred to his Loan Account. Work out the amount due to Ajay and state as to how will you settle his account?

The Balance Sheet of A, B and C who were sharing the profits in proportion to their capitals stood as on March 31, 2017. [Balance Sheet Data Provided] B retired on the date of Balance Sheet and the following adjustments were to be made: (a) Stock was depreciated by 10%. (b) Factory building was appreciated by 12%. (c) Provision for doubtful debts to be created up to 5%. (d) Provision for legal charges to be made at Rs.265. (e) The goodwill of the firm to be fixed at Rs.10,000. (f) The capital of the new firm to be fixed at Rs.30,000. The continuing partners decide to keep their capitals in the new profit sharing ratio of 3:2. Work out the final balances in capital accounts of the firm, and the amounts to be brought in and/or withdrawn by A and C to make their capitals proportionate to then new profit sharing ratio.

On December 31, 2015, the Balance Sheet of Pinki, Qureshi and Rakesh showed as under: [Balance Sheet Data Provided] The partnership deed provides that the profit be shared in the ratio of 2:1:1 and that in the event of death of a partner, his executors be entitled to be paid out: (a) The capital of his credit at the date of last Balance Sheet. (b) His proportion of reserves at the date of last Balance Sheet. (c) His proportion of profits to the date of death based on the average profits of the last three completed years, plus 10%, and (d) By way of goodwill, his proportion of the total profits for the three preceding years. The net profit for the last three years were: (Rs.) 2013 16,000 2014 16,000 2015 15,400 Rakesh died on April 1, 2015. He had withdrawn Rs.5,000 to the date of his death. The investment were sold at par and R’s Executors were paid off. Prepare Rakesh’s Capital Account that of his executors.

What are the different ways in which a partner can retire from the firm.

Write the various matters that need adjustments at the time of retirement of a partners.