Question

How would you treat General Reserve on retirement of a partner? (Answer in one sentence)

Answer 1

Elo!!

The retirement of a partner extinguishes his interest in the Partnership firm and this leads to dissolution of the firm or reconstitution of the Partnership. A partner, who goes out of a firm, is called retiring partner or outgoing partner.

Answer 2

According to the profit-sharing ratio, the general reserve is transferred to all the capital accounts.

This process is done so that the retiring partner could get his fair amount of money along with his accumulated profits of firm.

Their respective shares are credited to all capital accounts of the partners.

In this way, the general reserve is given to the retirement partner.