* General reserve A/c Dr.
To Retiring Partners’ Capital A/c-
If there are accumulated losses on the retirement or death of a partner then it will be distributed between all partners in their old ratio. In case of loss partners account are debited whereas in case of profit partner's account are credited. So, general reserve is a accumulated profit so for the retiring partner share his account is credited.
* Retiring Partners’ Capital A/c Dr.
To Retiring Partners’ Loan A/c-
Once all adjustments, such as the retiring partner's share of goodwill, accumulated profits, losses, revaluation gains/losses, and any other relevant factors, have been made, the total amount due to the retiring partner is ascertained. If the firm is capable of making the full payment immediately, the amount is paid to the retiring partner without delay. However, if the firm is unable to make the full payment immediately, the amount due is transferred to the retiring partner's Loan Account. As and when the firm is capable of making payments, the amounts are debited from the Loan Account and credited to the retiring partner's account accordingly. This ensures that the retiring partner eventually receives the full amount owed to them over time as per the agreed terms.
When the retiring partner's entire amount is treated as a loan:
Retiring Partners’ Capital A/c Dr.
To Retiring Partners’ Loan A/c
* Asset A/c Dr.
To Revaluation A/c-
Revaluation account serves as a record of changes in the value of assets and liabilities. When there is an increase in the value of each asset or a decrease in liabilities, it is considered a gain and is credited to the revaluation account. Conversely, when there is a decrease in the value of assets or an increase in liabilities, it is considered a loss and is debited to the revaluation account. Additionally, any unrecorded assets are credited to the revaluation account, and unrecorded liabilities are debited to the revaluation account to ensure proper accounting. After all the adjustments are made, the revaluation account's final balance can either be a credit or a debit. If it shows a credit balance, it indicates a net gain resulting from the revaluation process. On the other hand, if it shows a debit balance, it indicates a net loss from the revaluation. Ultimately, the net gain or net loss reflected in the revaluation account will be transferred to the capital accounts of the old partners based on the previously agreed-upon ratio among the partners.
* Gaining partner's Capital A/c
To Deceased partner's capital A/c-
Retiring or deceased partner got compensated in share of goodwill. Gaining partners will compensate the retiring partner in their gaining ratio. Journal entry for this- Gaining partner's Capital A/c To Deceased partner's capital A/c. |
