Question

mode of settlement of accounts of retiring / decreased partner​

Answer 1

Answer:

Settlement of the amount due to the retiring partner

The amount due to the retiring partner from the partnership firm is the balance of his capital account after making adjustments for goodwill, accumulated profits and losses, profit or loss on revaluation, remuneration due, etc. The settlement is to be done in the manner prescribed in the partnership deed. The amount due to the retiring partner may be settled in one of the following ways:

i. Paying the entire amount due immediately in cash

ii. Transfer the entire amount due, to the loan account of the partner

iii. Paying part of the amount immediately in cash and transferring the balance to the loan account of the partner

The journal entries to be made are as follows:

a. When the amount due is paid in cash immediately

b. When the amount due is not paid immediately in cash

c. When the amount due is partly paid in cash immediately

Retiring partner’s loan account will appear on the liabilities side of the balance sheet prepared after retirement till it is completely settled.