Mention any two modes of payment on settlement of retiring partners capital account
Answers
If a lumpsum payment is made to a retiring partner - Retiring partner's capital a/c Dr. To Cash/Bank a/c If the amount is paid in equal instalments with interest - Retiring partner's capital a/c Dr. To Retiring partner's loan a/c If both the methods are used so that retiring partner get a lumpsum amount as well as equal instalments, the journal entry would be - Retiring partner's capital a/c Dr. To Cash/Bank a/c To Retiring partner's loan a/c.
When a partner gets retired, his capital has to be adjusted for goodwill, revaluation of assets, accumulated profits, and liabilities etc. to calculate the final payment amount.
Lump-Sum payment: Other partners may settle the retiring partner by an immediate lump sum payment.
Transfer of the amount due, to his loan account: Other partners may agree on adjusting the retiring payment amount to his loan account.