Meaning
Retirement of a partner means the retiring partner does not remain a partner of the firm but the firm continues. It means the firm continues its business with the remaining or continuing partners in accordance with the new or changed Partnership Deed. A partner may retire form the firm:
- If there is an agreement to that effect; or
- If the agreement does not exist then if all the partners agree to his retirement; or
- If the Partnership is at will, by giving a notice (written) to the remaining partners of his decision to retire.
Adjustments Required on Retirement of a Partner:-
Following matters are considered and resolved on retirement of a partner:
- Determining New Profit-sharing Ratio and Gaining Ratio, i.e., change in profit-sharing ratio.
- Valuation and Adjustment of Goodwill.
- Revaluation of Assets and Reassessment of Liabilities.
- Reserves and Undistributed Profits (Accumulated Profits)/Losses.
- Determination of amount due to Retiring Partners.
- Payments to the Retiring Partner.
- Adjustment of Capitals (if so decided by the partners)
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