CBSE Class 12 Accountancy Chapter 4 Notes PDF – Retirement Of A Partner

CBSE Class 12 Accountancy Chapter 4 notes for “Retirement Of A Partner” are the most crucial study tool for last-minute revision and CUET Accountancy Exam preparation. Students do not need to take separate notes for the CUET Accounting syllabus because all of the notes and formulas are available on our website in PDF format. The last-minute Careers Adda CUET Accounts Notes have the potential to get more marks than intended.

CBSE Class 12 Accountancy Chapter 4 Notes

CBSE Class 12 Accountancy Chapter 4 Notes (Retirement Of A Partner) include thorough notes for each concept. CUET UG Accountancy Notes are developed by our skilled subject matter experts who have extensive knowledge of accounting. After reviewing the CUET accounts notes, a candidate can easily obtain high marks.

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Class 12 Accountancy Chapter 4 Notes PDF (Retirement Of A Partner)

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Accountancy Notes for Chapter 4 – Retirement Of A Partner

Accountancy Notes for Chapter 4 are the most significant study materials since they assist students in understanding the concepts while also revising them. CUET Accountancy Notes 2026 provides a full explanation of all ideas and formulas. Check the overview of the notes below:

ASCERTAINING THE AMOUNT DUE TO RETIRING/DECEASED PARTNER

When a partner retires or dies, the firm must determine the total sum due to them (or their legal representatives/executors).
This amount is calculated by adjusting their capital account for various credits and deductions.
Items to be Credited (Added):
1. Capital and Current Account Balances: The credit balances existing in the books.
2. Share of Goodwill: Their portion of the firm’s valued goodwill.
3. Share of Accumulated Profits: Portions of reserves or general reserves.
4. Revaluation Gain: Their share of profit from the revaluation of assets and liabilities.
5. Intervening Profits: Share of profits earned from the last Balance Sheet date up to the date of retirement or death.
6. Other Dues: Interest on capital, salary, or commission due up to the exit date.

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Items to be Debited (Subtracted):
1. Debit Balances: Current account debit balances or accumulated losses.
2. Revaluation Loss: Their share of loss from the revaluation of assets and liabilities.
3. Drawings and Interest: Total drawings and any interest on those drawings up to the date of exit.

New Profit Sharing Ratio (NPSR)
The New Profit Sharing Ratio is the proportion in which the remaining partners will share future profits after one partner leaves the firm.
1. Logic: The new share of a continuing partner is their original share plus the portion they acquire from the outgoing partner.
2. Formula: New Share = Old Share + Acquired Share from Outgoing Partner.
3. Default Rule: In the absence of a specific agreement, it is assumed that the remaining partners acquire the outgoing share in their old profit-sharing ratio.
Example 1: Default Scenario
Asha, Deepti, and Nisha share profits in 3 : 2 : 1. If Deepti retires, the new ratio between Asha and Nisha is simply their remaining
old ratio.
Asha’s New Share = 3
Nisha’s New Share = 1
New Ratio = 3 : 1.

Gaining Ratio
The Gaining Ratio is the proportion in which the continuing partners acquire the share of the retiring or deceased partner.
Purpose: It is used to determine how much the gaining partners must compensate the retiring/deceased partner for their share of goodwill.
Formula: Gaining Share = New Share – Old Share.
Numerical Example: Comprehensive Calculation
Scenario:
Naveen, Suresh, and Tarun are partners sharing profits in the ratio of 5 : 3 : 2. Suresh retires. His share is acquired by Naveen and Tarun in the ratio of 2 : 1.

Note for Students:

Gaining Ratio is about the change (How much of the “leftover” piece did each person take?).
New Profit Sharing Ratio is about the result (How much does each person own now in total?).

Accounting Treatment of Goodwill on Retirement/Death

Goodwill is the reputation of the firm earned by the efforts of all existing partners. At the time of reconstitution due to retirement
or death, the following rules apply:
• Entitlement: The retiring or deceased partner is entitled to their share of goodwill valued at the time of their exit.
• Compensation: The continuing partners who gain a share of profit must compensate the outgoing partner.
• Adjustment Ratio: This compensation is adjusted in the Gaining Ratio.
• Existing Goodwill:If goodwill already appears in the firm’s books (Balance Sheet), it must be written off immediately among all partners in their Old Profit Sharing Ratio.
• Hidden Goodwill: If a lump sum is paid to the outgoing partner in excess of their adjusted capital, the excess is treated as their share of hidden goodwill.

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