Accounting Implications of Partner Retirement in a Firm

The video tutorial discusses the process of admitting a new partner and the implications of a partner's retirement in a business firm. It covers the necessary accounting adjustments, including revaluation of assets, distribution of goodwill, and profit sharing. The tutorial also explains how to calculate new profit-sharing ratios and the importance of settling accounts to ensure each partner receives their due share. The process is similar in the event of a partner's death, with payments made to their executor or nominee. The video concludes with a discussion on capital contributions and adjustments post-retirement.

Why did Mr. Jack decide to retire from the firm?

• He wanted to start his own business.

• He wanted to travel the world.

• He found it difficult to work with Miss Lucy.

• He was offered a better position elsewhere.

What needs to be done to settle accounts when a partner retires?

• Ignore the retiring partner's share.

• Sell off all the firm's assets.

• Hire a new partner immediately.

• Revalue assets and liabilities.

How is goodwill distributed when a partner retires?

• It is distributed among all partners in their profit-sharing ratio.

• Only the retiring partner receives it.

• It is not distributed at all.

• It is given to the partner with the highest share.

What happens to the profits or losses calculated up to the retirement date?

• They are donated to charity.

• They are given to the retiring partner only.

• They are divided among all partners, including the retiring partner.

• They are kept by the firm.

In the event of a partner's death, who receives the retiring partner's dues?

• The firm's accountant.

• The remaining partners.

• The executor or nominee of the deceased partner.

• The government.

What is the next step for remaining partners after a partner retires?

• They stop sharing profits.

• They hire a new partner immediately.

• They decide on a new profit-sharing ratio.

• They must dissolve the firm.

How is the gain ratio calculated for remaining partners?

• By adding the old and new ratios.

• By dividing the old ratio by the new ratio.

• By subtracting the old ratio from the new ratio.

• By multiplying the old ratio by the new ratio.