- The document discusses the retirement of partners from a partnership firm. - When a partner retires, the old partnership ends and a new partnership is formed among the continuing partners, though the firm continues. - A retiring partner remains liable for acts of the firm before retirement but can be discharged by agreement. They remain liable after retirement until public notice is given. - On retirement, a partner is entitled to their share of goodwill, reserves, and revaluation of assets and liabilities. - Several examples are provided to demonstrate calculating new profit sharing ratios and gaining ratios when partners retire.

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PRASHANT’S COMMERCE ACADEMY F- 130, NEAR SHANTI SWEETS, KAMLA NAGAR, AGRA
RETIREMENT / DEATH OF A PARTNER
 RETIREMENT OF A PARTNER:
MEANING
Retirement of a partner means retiring from the partnership, i.e., ceasing to be a partner of the firm. A partner
may retire from the firm:
(i) if there is an agreement to that effect;
(ii) if all the partners agree to his retirement; or
(iii) if the partnership is at will, by giving a written notice to the remaining partners of his decision to retire.
Retirement of a partner means reconstitution of the firm under which old partnership comes to an end and new
partnership among the remaining or continuing partners, comes into existence. The firm, however, continues.
LIABILITY OF A RETIRING PARTNER
Liability for the Acts before Retirement
A retiring partner remains liable for all the acts of the firm up to the date of his retirement. However, a retiring
partner may be discharged from his liability by an agreement between himself, third party and the continuing
partners. [Section 32(2)]
Liability for the Acts after Retirement
A retiring partner also continues to be liable to third parties for the acts of the firm even after his retirement until
a public notice of his retirement is given. [Section 32(3)]
A retiring partner is entitled to get the following:
1. SHARE IN GOODWILL:- Goodwill of the firm is valued and the retiring partner’s share of goodwill is credited to
his Capital Account.
2. SHARE IN RESERVES:- Reserves are the undistributed profits of the previous years. Hence, the retiring partner’s
share of reserves or undistributed profits in also credited to his Capital Account.
3. SHARE IN REVALUATION OF ASSETS AND LIABILITIES:- Assets and Liabilities are revalued on the date of
retirement and retiring partner’s share of profit is credited or the loss is debited to his Capital Account.
Total amount due to the retiring partner, thus ascertained, is either paid off immediately or is transferred to his
loan account, to be paid afterwards.
 ACCOUNTING PROBLEMS AT THE TIME OF RETIREMENT OF A PARTNER
Following accounting problems arise on the retirement of a partner:
1. Calculation of new profit sharing ratio and gaining ratio of the continuing partners.
2. Treatment of Goodwill.
3. Accounting Treatment of Reserves, accumulated profits and losses.
4. Accounting Treatment for Revaluation of Assets and Liabilities.
5. Payment to retiring partner.
6. Adjustment of Capitals in proportion to profit sharing ratio.
 CALCULATION OF NEW PROFIT SHARING RATIO AND GAINING RATIO:-
EXAMPLE - 1. X, Y and Z are partners sharing profits and losses in the ratio of 5 : 4 : 3. Calculate the new ratio
when: (i) X retires, (ii) Y retires, (iii) Z retires. [Ans. New Ratio (i) 4 : 3; (ii) 5 : 3; (iii) 5 : 4]
EXAMPLE - 2. (i) A, B and C are partners sharing profits in the ratio of : : . Find out the new ratio if B
retires. [Ans. New Ratio – 3 : 1]
EXAMPLE – 2. (ii) P, Q and R are partners sharing profits in the ratio of : : . Find out the new ratio if P
retires. [Ans. New Ratio 4 : 1]
EXAMPLE - 3. A, B and C are partners in a firm sharing profits in the ratio of 5 : 4 : 3. B retired and his share
was divided equally between A and C. Calculate the new profit sharing ratio of A and C.
[Ans. New Ratio – 7 : 5] (C.B.S.E. 2009, Outside Delhi)
EXAMPLE - 4. A, B and C were partners sharing profits in the ratio of 5 : 4 : 3. C retired and his share was
taken up by A and B in the ratio of 3 : 2. Find out the new ratio. [Ans. New Ratio – 17 : 13]
EXAMPLE - 5. A, B and C are partners sharing profits in the ratio of : : . A retires and his share is taken
up by B and C in the ratio of 1 : 2. Calculate the new ratio. [Ans. New Ratio – 29 : 31]

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PRASHANT’S COMMERCE ACADEMY F- 130, NEAR SHANTI SWEETS, KAMLA NAGAR, AGRA
EXAMPLE - 6. P, Q and R are partners sharing profits in the ratio of 5 : 3 : 2. R retires and his share is entirely
taken by P. calculate new profit sharing ratio of P and Q. [Ans. New Ratio – 7 : 3]
EXAMPLE - 7. A, B and C are in partnership sharing profits and losses as 1/2, 3/10 and 1/5 respectively. B
retires and his share is taken by A and C in the ratio of 2 : 1. Thereafter, D is admitted for 1/4th
share of
profit, half of which was given by A and the remaining share was taken equally from A and C. Calculate
profit-sharing ratio after D’s admission. [Ans. New Ratio of A, C and D – 41 : 19 : 20]
CALCULATION OF GAINING RATIO
EXAMPLE - 8. Sharma, Verma and Neetu were partners sharing profits and losses in proportion of , and .
Calculate the new profit sharing ratio between continuing partners if, (a) Sharma retires, (b) Verma retires,
(c) Neetu retires. Also calculate their gaining ratio of each of the above situation.
[Ans. New Ratio - (i) 1 : 5; (ii) 2 : 5 ; (iii) 2 : 1; Gaining Ratio - (i) 1 : 5; (ii) 2 : 5 ; (iii) 2 : 1 ]
EXAMPLE - 9. A, B and C are partner sharing profits and losses in the ratio of 4 : 3 : 2. B retires. A and C
decided to share the profits and losses in future in the ratio of 5 : 4. Calculate gaining ratio. [Ans. 1 : 2 ]
EXAMPLE - 10. A, B, C and D are partners sharing profits and losses in the ratio of , , and respectively. C
retires and A, B and D decide to share the profits and losses equally in future. Calculate the gaining ratio.
[Ans. Gaining Ratio – 0 : 1 : 1 ]
EXAMPLE - 11. Madhu, Surbhi and Nikhil are partners without any partnership deed. Madhu retires.
Calculate the future ratio of continuing partner if they agreed to acquire her share (i) in the ratio 5:3 (ii)
equally. Also mention their gaining ratio.
[Ans. New Ratio - (i) 13 : 11; (ii) 1 : 1; Gaining Ratio - (i) 5 : 3; (ii) 1 : 1 ]
EXAMPLE - 12. A, B and C were partners sharing ratio of , and . A retires and surrenders of his share in
favour of B and remaining in favour of C. Calculate new ratio and gaining ratio.
[Ans. New Ratio - 13 : 5; Gaining Ratio - 2 : 1 ]
EXAMPLE - 13. A, B and C were partners sharing ratio of , and . A retires and surrenders from his share
in favour of B and remaining in favour of C. Calculate new ratio and gaining ratio.
[Ans. New Ratio – 7 :5; Gaining Ratio - 1 : 3 ]
EXAMPLE - 14. A, B, C and D were partners sharing profits in the ratio of 3 : 2 : 1 : 4. A retires and his share is
acquired by B and C in the ratio of 3 : 2. Calculate the new ratio and the gaining ratio.
[Ans. New Ratio – 19 : 11 : 20; Gaining Ratio – 3 : 2 ] (Haryana Board, 2017)
EXAMPLE – 15. On 1-1-2008, Uday and Kaushal entered into partnership with fixed capitals of Rs. 7,00,000
and Rs. 3,00,000 respectively. They were doing good business and were interested in its expansion but could
not do the same because lack of capital. Therefore, to have more capital, they admitted Govind as a new
partner on 1-1-2010. Govind brought Rs. 10,00,000 as capital and the new profit sharing ratio decided was 3
: 2 : 5. On 1-1-2012, another new partner Hari was admitted with a capital of Rs. 8,00,000 for 1/10th
share in
the profits, which he acquired equally from Uday and Kaushal and Govind. On 1-4-2014, Govind died and his
share was taken over by Uday and Hari equally.
Calculate : (i) The sacrificing ratio of Uday and Kaushal on Govind’s admission.
(ii) New profit sharing ratio of Uday, Kaushal, Govind and Hari on Hari’s admission.
(iii) New profit sharing ratio of Uday, Kaushal and Hari on Govind’s death. (C.B.S.E. 2015, All India)
[Ans. (i) Sacrificing Ratio of Uday and Kaushal – 2 : 3;
(ii) New profit sharing ratio of Uday, Kaushal, Govind and Hari – 8 : 5 : 14 : 3
(iii) New profit sharing ratio of Uday, Kaushal and Hari – 3 : 1 : 2]
EXAMPLE – 16. X, Y and Z are partners sharing profits in the ratio of 3 : 2 : 1. X retires from the firm and it is
decided that the profit sharing ratio between Y and Z will be the same as existing between X and Y. Calculate
new ratio and gaining ratio.
[New Ratio of Y and Z = 3 : 2; Gaining Ratio of Y and Z = 8 : 7]

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PRASHANT’S COMMERCE ACADEMY F- 130, NEAR SHANTI SWEETS, KAMLA NAGAR, AGRA
 PRACTICAL QUESTIONS OF RETIREMENT AND DEATH OF A PARTNER
1. (a) A, B and C are partners sharing profits in the ratio of 6 : 5 : 4. Calculate new profit sharing ratios if (i) A
retires; (ii) B retires; (iii) C retires. [Ans. (i) 5 : 4; (ii) 6 : 4; (iii) 6 : 5]
1. (b) A, B, C and D are partners sharing profits in the ratio of 5 : 3 : 1 : 2. Calculate the new profit sharing ratio if
B and C retire from the firm. [Ans. 5 : 2]
1. (c) A, B, C and D are partners sharing profits in the ratio of 4 : 3 : 2 : 1. A and C retire from the firm. Calculate
the new profit sharing ratio of B and D. [Ans. 3 : 1.]
2. (a) X, Y and Z are partners sharing profits in the ratio of 2/3 : 1/4 : 1/12. Calculate the new ratio if X retires.
[Ans. 3 : 1]
2. (b) A, B and C are partners sharing profits in the ratio of 1/2 : 3/8 : 1/8. Calculate the new ratio if C retire.
[Ans. 4 : 3.]
3. (a) L, M and O were partners in a firm sharing profits in the ratio of 3 : 2 : 2. M retired and his share was
divided equally between L and O. Calculate the new profit sharing ratio of L and O.
[Ans. 4 : 3]
3. (b) A, B and C were partners in a firm sharing profits in the ratio of 8 : 4 : 3. B retires and his share is taken up
equally by A and C. Find the new profit sharing ratio. (C.B.S.E. 2009) [Ans. 2 : 1.]
3. (c) Shiv, Mohan and Hari were partners in a firm sharing profits in the ratio of 5 : 5 : 4. Mohan retired and his
share was divided equally between Shiv and Hari. Calculate the new profit sharing ratio of Shiv and Hari.
[Ans. 15 : 13.] (C.B.S.E. 2012, Outside Delhi)
4. A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. B retires and his share was taken up by A and C
in the ratio of 3 : 2. Find out the new ratio. [Ans. 29 : 16]
5. (a) A, B and C are partners sharing profits in the ratio of 4 : 3 : 1. A retires and his share in taken over by B
and C equally. Calculate the new ratio. [Ans. 5 : 3]
5. (b) A, B and C are partners sharing profits in the ratio of 1/2 : 1/3 : 1/6. B retires and his share is taken by A
and C in the ratio of 5:3. Calculate the new ratio. [Ans. 17 : 7]
5. (c) A, B and C were partners sharing profits in the ratio of 1/5, 1/3 and 7/15 respectively. C retire and his
share was taken up by A and B in the ratio of 3 : 2. Calculate the new ratio. [Ans. 12 : 13.]
5. (d) X, Y and Z were partners sharing profits in the ratio of 4/9 : 3/9 : 2/9. X reties and his share was taken up
by Y and Z in the ratio of 2 : 1. Find out the new ratio. [Ans. 17 : 10]
6. X, Y and Z are partners sharing in the ratio of 2 : 2 : 1. Y retires and his share is entirely taken by Z. calculate
the new ratio. [Ans. 2 : 3]
7. (a) A, B and C were partners sharing profits in the ratio of 7 : 5 : 3. Find out the gaining ratio and new ratios
when (i) A retires, (ii) B retires or (iii) C retires.
[Ans. Gaining Ratios – (i) 5 : 3; (ii) 7 : 3; (iii) 7 : 5, New Ratios – (i) 5 : 3; (ii) 7 : 3; (iii) 7 : 5]
7. (b) X, Y and Z share profits in the ratio of 1/2, 3/10, 1/5. Calculate the gaining ratio and new ratio when: (i) X
dies, (ii) Y dies or (iii) Z dies.
[Ans. Gaining Ratios – (i) 3 : 2; (ii) 5 : 2; (iii) 5 : 3. New Ratios – (i) 3 : 2; (ii) 5 : 2; (iii) 5 : 3]
7. (c) P, Q, R and S were partners sharing profits in the ratio of 5 : 4 : 3 : 1. P and S retires from the firm.
Calculate the gaining ratio and new profit sharing ratio of Q and R.
[Ans. Gaining Ratio – 4 : 3 and New Ratio – 4 : 3.]

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PRASHANT’S COMMERCE ACADEMY F- 130, NEAR SHANTI SWEETS, KAMLA NAGAR, AGRA
8. (a) On 1-4-2014 Ashish, Namish and Aman were partners sharing profits and losses in the ratio of 2/5, 2/5
and 1/5 respectively. On this date Namish retires. The new profit sharing ratio of Ashish and Aman will be 3/4
and 1/4 respectively. Calculate gaining ratio. [Ans. 7 : 1.]
8. (b) On 1st
April, 2014 A, B and C were partners sharing profits and losses in the ratio of A 5/10, B 3/10 and C
2/10 respectively. On this date B retires. The new profit sharing ratio of A and C will be A 3/5 and C 2/5.
Calculate gaining ratio. [Ans. 1 : 2.]
9. (a) A, B and C are partners sharing profits in the ratio of 1/2 : 1/3 : 1/6. C retires and A and B decide to share
future profits equally. Calculate the gaining ratio.
[Ans. A gains nothing; B gains 1/6.]
9. (b) A, B, C and D are partners sharing profits in the ratio of 5 : 4 : 3 : 2. A retires and B, C and D decide to
share the profits and losses equally in future. Calculate the gaining ratio. [Ans. Gaining Ratio 2 : 5 : 8.]
10. (a) Rekha, Ruchi and Suruchi are partners. Ruchi retires. Calculate new ratio if continuing partners acquired
her share in the ratio of 2 : 3. Also mention the gaining ratio.
[Ans. New Ratio 7 : 8; Gaining Ratio 2 : 3.]
10. (b) Kangli, Mangli and Sanvali are three partners sharing profits in the ratio of 4 : 3 : 2. Kangli retires.
Assuming Mangli and Sanvali will share profits in future in the ratio of 5 : 3, determine the gaining ratio.
[Ans. Gaining Ratio 21 : 11.]
10. (c) X, Y and Z are partners sharing profits in the ratio of 1/9 : 1/3 and 5/9. Z retires and surrenders 3/4th
of
this share in favour of X and remaining in favour of Y. calculate new ratio and gaining ratio.
[Ans. New Ratio 19 : 17; Gaining Ratio 3 : 1.]
11. (a) A, B and C are partners sharing profits and losses equally. B dies. A and C agree to share future profits in
the ratio of 7 : 5. Calculate the gaining ratio. [Ans. Gaining Ratio 3 : 1]
11. (b) A, B and C are partners with capitals of Rs.1,00,000, Rs.75,000 and Rs.50,000 respectively. They share
profits and losses in the ratio of their capital. C retires, His share is acquired by A and B in the ratio of 2 : 1.
Calculate the new profit sharing ratio and gaining ratio.
[Ans. New Ratio 16 : 11; Gaining Ratio 2 : 1]
11. (c) A, B and C are partners with capitals of Rs.1,00,000; Rs.75,000 and Rs.50,000 respectively. On C’s
retirement, his share is acquired by A and B in the ratio of 6 : 4. Ascertain new profit sharing ratio and gaining
ratio.
[Ans. New Ratio 8 : 7; Gaining Ratio 3 : 2.]
12. P, Q, R and S were partners sharing profits in the ratio of 2 : 3 : 5 : 2. S retires and his share is acquired by Q
and R in the ratio of 3 : 2. Calculate new ratio and gaining ratio.
[Ans. New Ratio 10 : 21 : 29; Gaining Ratio between Q and R 3 : 2.]
13. (a) A and B were partners sharing profits in the ratio of 5 : 3. On 1st
April, 2014, they admitted C as a new
partner for 1/4th
share which he acquired from A and B in the ratio of 3 : 2. On 1st
April, 2015, another new
partner D was admitted for 1/6th
share which he acquires 1/10 from A and 1/15 from C. On 1st
April, 2016 A dies
and his share was taken over by B, C and D equally.
Calculate: (i) New profit sharing ratio of A, B and C on C’s admission.
(i) New profit sharing ratio of A, B, C and D on D’s admission.
(i) New profit sharing ratio of B, C and D on A’s death.
[Ans. (i) A : B : C - 19 : 11 : 10; (ii) A : B : C : D - 45 : 33 : 22 : 20; (iii) B : C : D - 48 : 37 : 35.]
13. (b) A, B and C were partners sharing profits in the ratio of 4 : 3 : 2. B retires form the firm. Calculate the new
ratio, if
(i) B’s share was taken up by A and C in the ratio of 2 : 1.
(ii) B’s share was taken up by A and C equally.
(iii) B’s share was taken up by A only. [Ans. (i) 2 : 1, (ii) 11 : 7, (iii) 7 : 2.]

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PRASHANT’S COMMERCE ACADEMY F- 130, NEAR SHANTI SWEETS, KAMLA NAGAR, AGRA
14. Jayant, Kartik and Leena were partners in a firm sharing profits and losses in the ratio of 5 : 2 : 3. Kartik died
and Jayant and Leena decided to continue the business. Their gaining ratio was 2 : 3. Calculate the new profit
sharing ratio of Jayant and Leena. (C.B.S.E. 2018 All India) (3) Ans. New Ratio 29 : 21