Class 12 Accountancy — Chapter 3: Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Chapter 3: Reconstitution of a Partnership Firm – Retirement/Death of a Partner is a chapter in Class 12 Accountancy (Part 1), part of the CBSE NCERT curriculum followed by over 25 million students across India. This chapter covers 8 topics including Calculation of New Profit Sharing Ratio, Calculation of Gaining Ratio, Ascertaining the Amount Due to Retiring/Deceased Partner. BrainWeave provides free AI-powered explanations — by voice or text, in Hindi or English — with no signup required.

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What you'll learn

▸Calculation of New Profit Sharing RatioCore concept

New Profit Sharing RatioContinuing PartnerAcquired ShareOld ShareRemaining Partners
▸Calculation of Gaining RatioCore concept

Gaining RatioNew ShareOld ShareContinuing PartnerShare Acquired
▸Ascertaining the Amount Due to Retiring/Deceased PartnerCore concept

Amount DuePartner's Capital AccountGoodwillReservesExecutor's Account
▸Accounting Treatment of GoodwillCore concept

GoodwillGaining RatioRetiring PartnerContinuing PartnerCapital Account Adjustment
▸Revaluation of Assets and LiabilitiesCore concept

Revaluation AccountReassessment of AssetsReassessment of LiabilitiesRevaluation ProfitOld Ratio
▸Adjustment for Accumulated Profits and LossesCore concept

Accumulated ProfitsGeneral ReserveUndistributed ProfitsAccumulated LossesOld Profit Sharing Ratio
▸Settlement of the Amount Due

Retiring Partner's Loan AccountDeceased Partner's Executor's AccountFinal SettlementInstallmentsLump-sum Payment
▸Distinction between Gaining Ratio and Sacrificing Ratio

Gaining RatioSacrificing RatioAdmission of PartnerRetirement of PartnerChange in Profit Share

Chapter Summary

Determining the ratio in which the remaining (continuing) partners will share future profits after a partner retires or dies. This involves adding the share acquired from the outgoing partner to the old share of the continuing partners.

The ratio in which the continuing partners acquire the share of profit from the retiring or deceased partner. It is calculated by subtracting the old profit share from the new profit share of each continuing partner.

Calculating the final amount payable to a retiring partner or the legal representative of a deceased partner. This involves adjusting their capital account for their share of goodwill, reserves, revaluation profit/loss, and other dues.

Adjusting for the firm's goodwill upon retirement/death. The retiring/deceased partner is credited for their share of goodwill, and the gaining partners are debited in their gaining ratio.

The process of reassessing the values of the firm's assets and liabilities at the time of retirement/death. The resulting profit or loss is distributed among all partners, including the outgoing one, in their old profit sharing ratio.

Distributing past undistributed profits (like General Reserve, Profit & Loss A/c credit balance) and losses among all partners, including the retiring/deceased partner, in their old profit sharing ratio.

Understanding the methods for paying the final claim to the outgoing partner or their representatives, which can be a lump-sum payment, payment in installments, or transferring the amount to a Loan Account (for a retired partner) or an Executor's Account (for a deceased partner).

Understanding the fundamental differences between Gaining Ratio (calculated on retirement/death) and Sacrificing Ratio (calculated on admission) in terms of meaning, timing of calculation, and effect on partners' profit shares.

Practice Questions from this Chapter

Tap "Get Solution" on any question to ask our AI tutor.

Explain fair profit sharing simply. Get Solution →
Handle a partner's retirement process. Get Solution →
Calculate a deceased partner's payment. Get Solution →
According to the chapter, what happens to the existing partnership deed upon the retirement or death of a partner? Get Solution →
What is the term for the ratio in which continuing partners acquire the share of a retiring or deceased partner? Get Solution →
In the absence of any specific agreement, how do the continuing partners acquire the share of a retiring partner? Get Solution →
Which of the following is listed as a credit (an addition) to the amount due to a retiring partner? Get Solution →
Which of the following is listed as a deduction from the amount due to a retiring partner? Get Solution →

Did you know?

💡 Ant colonies are giant partnerships, with each ant having a specific job for the colony.
💡 Clownfish and sea anemones are perfect partners, each protecting the other from harm.
💡 The oldest known business partnership was formed over 4,000 years ago in Mesopotamia.
💡 When a giant star dies, it can explode and create all the heavy elements in the universe.
💡 Ancient Egyptian pharaohs had detailed plans for their "retirement" into the afterlife.

Frequently Asked Questions

How many topics are covered in this chapter?

This chapter covers 8 key topics: Calculation of New Profit Sharing Ratio, Calculation of Gaining Ratio, Ascertaining the Amount Due to Retiring/Deceased Partner, Accounting Treatment of Goodwill, Revaluation of Assets and Liabilities, and more. The BrainWeave AI tutor explains each one with examples.

Is Chapter 3: Reconstitution of a Partnership Firm – Retirement/Death of a Partner important for board exams?

Yes — Class 12 is a CBSE board exam year, and every NCERT chapter is part of the syllabus. Use BrainWeave's AI tutor to master this chapter, then practice with the auto-generated quizzes and mind maps.

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Related Chapters

Chapter 2: Reconstitution of a Partnership Firm – Admission of a Partner

Chapter 4: Dissolution of Partnership Firm

Chapter 1: Accounting for Partnership: Basic Concepts

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