On retirement/death of a partner, the retiring/deceased partner's capital account will be credited with: Option 1: His/her share of goodwill. Option 2: Goodwill of the firm. Option 3: Shares of goodwill of remaining partners. Option 4: Goodwill of the another firm.

Answer: His/her share of goodwill. Solution: When a partner retires or dies, their capital account is credited with their share of goodwill. Goodwill represents the value of the firm's reputation built over time. Since the retiring/deceased partner contributed to building this goodwill during their association with the firm, they are entitled to compensation for their proportionate share. The journal entry for this adjustment is:, Particulars, Dr. (), Cr. (), Remaining Partners' Capital A/c (individually), xxx, To Retiring/Deceased Partner's Capital A/c, xxx, (Being retiring/deceased partner's share of goodwill credited), The remaining partners' capital accounts are debited because they gain by the retiring partner leaving - they will now share the goodwill among fewer partners. Therefore, they compensate the outgoing partner for their share. Important: The retiring partner gets only their proportionate share (based on profit-sharing ratio), not the entire firm's goodwill. For example, if goodwill is ₹3,00,000 and the partner's share is 1/3, they receive ₹1,00,000. Option 2 is incorrect as it would mean giving the entire firm's goodwill value to one partner. Options 3 and 4 are not relevant to the accounting treatment.

Partnership

Retirement/Death

Easy

common

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

His/her share of goodwill.

Goodwill of the firm.

Shares of goodwill of remaining partners.

Goodwill of the another firm.

✅ Correct Option: 1

When a partner retires or dies, their capital account is credited with their share of goodwill.

Goodwill represents the value of the firm's reputation built over time. Since the retiring/deceased partner contributed to building this goodwill during their association with the firm, they are entitled to compensation for their proportionate share.

The journal entry for this adjustment is:

Particulars	Dr. ($)	Cr. ($)
Remaining Partners' Capital A/c (individually)	xxx
To Retiring/Deceased Partner's Capital A/c		xxx
(Being retiring/deceased partner's share of goodwill credited)

The remaining partners' capital accounts are debited because they gain by the retiring partner leaving - they will now share the goodwill among fewer partners. Therefore, they compensate the outgoing partner for their share.

Important: The retiring partner gets only their proportionate share (based on profit-sharing ratio), not the entire firm's goodwill. For example, if goodwill is ₹3,00,000 and the partner's share is 1/3, they receive ₹1,00,000.

Option 2 is incorrect as it would mean giving the entire firm's goodwill value to one partner. Options 3 and 4 are not relevant to the accounting treatment.

2026: 24 May Shift 1

The following will not be deducted from the sum due to the retiring partner:

2026: 13 May Shift 1

Ajay, Bhanu and Chetan are partners in a firm sharing profit in the ratio of 3 : 4 : 2. Bhanu wants to retire from the firm. The profit on revaluation on that date was Rs. 1,80,000. New ratio between Ajay and Chetan is 5 : 3. Profit on revaluation will be distributed as :

2025: 14 May Shift 1

Which combination of statements are correct about Death of a partner-

(A) Ascertainment of new profit sharing ratio and gaining ratio

(B) Preparation of Realization Account

(D) Adjustment of capital, if required

Choose the correct answer from the options given below:

2026: 20 May Shift 1

From the following options, select the deductions to be made from the share of a partner at the time of his/her retirement.

(A) Debit balance of his current account

(B) Share of goodwill to be written off

(D) Share of loss on revaluation of assets and liabilities

Choose the correct answer from the options given below:

2026: 19 May Shift 1

X, Y and Z are partners sharing profits in the ratio of 4 : 3 : 2. Y retires and his capital after making adjustments for reserves and profits on revaluation stands at Rs 92,800. X and Z agreed to pay him Rs 1,00,000 in full settlement of his claim. Find the amount of goodwill of the firm.

2023: 29 May Shift 2

Identify that account to which share of profit of a deceased partner is debited from the date of the last Balance Sheet to the date of his/her death

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

Solution

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