Partnership

Retirement/Death

Easy

If nothing is mentioned, the amount due to retiring partner is transferred to _______.

Bank A/c

Cash A/c

Retiring partner loan A/c

Retiring partner current account

✅ Correct Option: 3

When a partner retires from a partnership firm, all amounts due to them (capital balance, share of goodwill, share of revaluation profit/reserve, etc.) are calculated and accumulated in their Capital Account.

If the mode and timing of payment is not specified in the partnership deed or at the time of retirement, the standard accounting practice is to transfer the entire amount due to the Retiring Partner's Loan Account.

This treatment is followed because:

The firm may not have sufficient liquidity to make immediate payment in cash or through bank. By transferring to Loan Account, the retiring partner becomes a creditor of the firm, and the amount becomes a liability payable at a later date (often with interest as per agreement).

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Retiring Partner's Capital A/c	xxx
To Retiring Partner's Loan A/c		xxx
(Amount due transferred to loan account)

The loan account remains in the books as a current liability until the payment is actually made. When payment is eventually made, the Loan Account is debited and Cash/Bank Account is credited.

If immediate payment was to be made, it would be directly transferred to Cash A/c or Bank A/c, but that requires specific mention in the question.

2025: 31 May Shift 1

Murli, Naveen and Omprakesh are partners sharing profits in the ratio of 3 /8 , 1/2 and 1/8 . Murli retires and surrenders 2/3rd of his share in favour of Naveen and the remaining share in favour of Omprakesh. The gaining ratio of the remaining partners is-

2025: 13 May Shift 2

The sum due to the retiring partner and to the legal representatives/executors (in case of death) includes the following, in addition to credit balance of his capital/current A/c, share of goodwill, gain on revaluation of assets and liabilities.

2025: 22 May Shift 2

Naveen, Suresh and Tarun are partners sharing profits and losses in the ratio of 5:3:2. Tarun retires from the firm and his share was taken over by Naveen and suresh in the ratio 2:1. In such a case, the new profit sharing ratio will be:

2026: 11 May Shift 2

Arun, Bijay and Harish are partners in a firm sharing profits in the ratios of 8:5:3. It is felt that Bijay will no more be able to actively participate in the affairs of the firm. Hence, with effect from April 1, 2025, they decided that, in future they will share the profits in the ratio of 2:1:2. Bijay will:

2025: 13 May Shift 1

The old Profit Sharing ratio among M, N and P are 2:2:1. The New profit sharing ratio after N retirement is 3:2. The gaining ratio between M and P will be:

2026: 29 May Shift 1

Lata, Shivangi and Vineeta are partners in a firm sharing profits in the ratio of 5 : 3 : 2. Shivangi retires. After making all adjustments relating to revaluation, goodwill and accumulated profit etc., the capital accounts of Lata and Vineeta showed a credit balance of Rs. 3,20,000 and Rs. 2,40,000 respectively. It was decided to adjust the capitals of Lata and Vineeta in their new profit sharing ratio. What would be the journal entries for bringing in or withdrawal of the necessary amounts involved?

If nothing is mentioned, the amount due to retiring partner is transferred to _______.

Solution

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