when partner is retire from firm, the ratio relevant is
Answers
Answer:
A partner may ascertain to either withdraw or retire from the enterprise due to certain reasons such as his bad health, his age, change in enterprise’s nature of a business, etc., In the Partnership at Will, a partner might retire at any time. Retirement leads to a reconstitution of an enterprise where the partners’ contribution ratio and the profit-sharing ratio change. The retiring partner is given his share of capital, revaluation profit or loss and goodwill.
Death or insolvency of a partner is the outcome in the reconstitution of an enterprise when the remaining partners desire to continue the enterprise. In case of bankruptcy or insolvency, all dues are paid to the bankrupt partner and partnership agreement is terminated as per the law a bankrupt is ineffectual to get into an agreement or a contract. In the case of decease, all dues are being paid to the legal successor of the deceased partner.
Answer:
At the time of retirement of a partner from partnership firm, reconstitution of partnership takes place. In this reconstitution there is revision of profit sharing ratio among partners, determination of gaining and sacrificing ratio, revaluation of assets and liabilities, adjustments for goodwill and joint life policy etc. takes place. All these adjustments takes place and finally profits or losses are distributed among old partners in old profit sharing ratio.
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