Partnership

Retirement/Death

Easy

common

In the event of retirement of partner, following deduction has to be made from his/her share.:

Debit balance of his current account (if any)

Credit balance of his capital account

Credit balance of his current account (if any)

His/Her share of goodwill

✅ Correct Option: 1

When a partner retires, we need to calculate the total amount due to them. This settlement amount is calculated by adding various amounts and then making necessary deductions.

The retiring partner's dues are calculated as:

Amounts to be Added:

Capital account balance (Credit)
Current account balance (Credit, if any)
Share in goodwill
Share in accumulated profits and reserves
Interest on capital, if applicable

Amount to be Deducted:

Current account balance (Debit, if any)

A debit balance in the current account means the retiring partner has either withdrawn more than entitled or owes money to the firm. Since this represents an amount the partner owes to the firm, it must be deducted from their total dues.

Why other options are incorrect:

Option 2 (Credit balance of capital account) → This is the partner's ownership stake and is added to calculate their dues, not deducted.

Option 3 (Credit balance of current account) → A credit balance means the firm owes money to the partner. This is added to their settlement amount, not deducted.

Option 4 (Share of goodwill) → The retiring partner's share in goodwill represents their right in the firm's reputation and is added to their dues, not deducted. The continuing partners compensate the retiring partner for their goodwill share.

The correct answer is Option 1 because only a debit balance (amount owed by the partner) needs to be deducted from the settlement amount.

2023: 28 May Shift 1

On retirement, the retiring partner's capital account will be credited with :

(A) His/Her Capital Balance

(B) His/Her share of goodwill

(D) his/her share of Reserve

(E) his/her drawings

Choose the correct answer from the options given below :

2026: 21 May Shift 2

Which of the following deduction may be made from the sum due to the retiring partner?

2026: 19 May Shift 1

Asha, Deepa and Lata are partners in a firm sharing profits in the ratio of 5 : 2 : 3. Deepa retires. After making all adjustments relating to revaluation, goodwill and accumulated profit etc., the capital accounts of Asha and Lata showed a credit balance of Rs. 2,60,000 and Rs. 1,00,000 respectively. It was decided to adjust the capitals of Asha and Lata in their new profit sharing ratio. Calculate the amount brought in or withdrawn by Asha.

2026: 23 May Shift 2

The sum due to the retiring partner includes:

A. His share of accumulated profits

B. Amount due to the third party

C. His share of goodwill

D. Credit balance of his capital account

Choose the correct answer from the options given below:

2022: 20 July Shift 1

At the time of retirement of a Partner if retiring Partner's whole amount is treated as loan, then the total amount is Debited in :

2026: 12 May Shift 1

Akash, Bhupesh, and Charan are partners in a firm sharing profits in the ratio of 3:2:1. Bhupesh retired and goodwill of the firm was valued at Rs. 60,000. Akash and Charan continue the business, sharing profits in the ratio of 3:1. What will be the journal entry for adjustment of goodwill in this case?

Particulars	Dr. Amount	Cr. Amount
Akash's Capital A/c Dr.	15,000
Charan's Capital A/c Dr.	5,000
To Bhupesh's Capital A/c		20,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Goodwill A/c Dr.		20,000
	To Bhupesh's Capital A/c			20,000

Particulars	Dr. Amount	Cr. Amount
Bhupesh's Capital A/c Dr.	20,000
To Akash's Capital A/c		15,000
To Charan's Capital A/c		5,000

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bhupesh's Capital A/c Dr.		20,000
	To Goodwill A/c			20,000

In the event of retirement of partner, following deduction has to be made from his/her share.:

Solution

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