The accounting problems in the event of retirement of a partner can be put as follows:
(i) Adjustment for Goodwill,
(ii) Revaluation of assets and liabilities.
(iii) Adjustment regarding Reserves and other undistributed profits.
(iv) Adjustments regarding profit sharing ratios.
(v) Payment to the retiring partner.
1. Goodwill. The retiring partner will be entitled to his share of goodwill in the (inn. The problem of goodwill can be dealt in the following two different ways:
(a) Where goodwill account is already appearing in the books:
In such a case if goodwill is properly valued, no further adjustment will be needed. The amount has already been credited to all the partners including the retiring partner.
(b) Where goodwill account is not appearing in lire book. [Read more…]