What traumatic event does Zitkala-Sa describe at the school?

The forcible cutting of her long hair

Why was the cutting of her hair so humiliating to Zitkala-Sa?

Among her people, shingled hair was worn by cowards and mourners

What happens to the partnership deed when a partner retires or dies?

The existing partnership deed comes to an end and a new one is framed for the remaining partners.

List the items included in the amount due to a retiring partner.

Credit balance of capital and current accounts, share of goodwill, share of reserves and accumulated profits, share of revaluation gain, share of profit up to the date, and interest or salary due.

How is the gaining ratio calculated?

Gaining ratio = new share minus old share for each continuing partner.

How is the retiring partner compensated for goodwill?

The gaining partners' capital accounts are debited in their gaining ratio and the retiring partner's capital account is credited with the share of goodwill.

How is a deceased partner's share of profit up to the date of death found?

It is estimated on the basis of time or on the basis of sales, applying the agreed profit-sharing share to the period or turnover.

Where is the amount due to a deceased partner transferred?

To the deceased partner's executor's account, which is then settled with the legal representatives.

Why is a Revaluation Account prepared on retirement?

To bring assets and liabilities to their current values so that the resulting profit or loss is shared by all old partners in their old ratio.

How are accumulated reserves treated on retirement?

They are distributed among all the partners, including the retiring partner, in their old profit-sharing ratio.

What is a retiring partner's loan account?

When the amount due is not paid immediately, it is transferred to a loan account and usually carries interest until settled.

Is the accounting treatment on death different from that on retirement?

It is largely the same; the main difference is computing the share of profit to the date of death and transferring the dues to the executor's account.

Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Class 12 Accountancy · Accountancy Part I · Chapter 3

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Summary

The retirement or death of a partner also reconstitutes the firm: the existing partnership deed ends, and the remaining partners continue under new terms. The accounting treatment is broadly the same in both cases and centres on ascertaining the amount due to the retiring partner or to the legal representatives of a deceased partner. This sum includes the credit balance of the partner's capital and current accounts, the share of goodwill, the share of accumulated profits and reserves, the share in the gain on revaluation of assets and liabilities, the share of profit up to the date of retirement or death, and any interest on capital or salary due. From this, deductions such as drawings, interest on drawings, the share of any loss and the share of revaluation loss are made. The remaining partners gain a part of the profit share, so the new profit-sharing ratio and gaining ratio are calculated, and the retiring partner is compensated for goodwill through the gaining partners in their gaining ratio. Assets and liabilities are revalued and accumulated reserves distributed in the old ratio. The amount finally payable to a retiring partner may be paid in cash or transferred to a loan account, while the share due on death is transferred to the executor's account. The chapter ends with the preparation of the balance sheet of the reconstituted firm.

Amount due to retiring or deceased partnerNew ratio and gaining ratioTreatment of goodwill on retirement and deathRevaluation and distribution of reservesLoan account and executor's account

Key terms

Retirement of a Partner

A partner leaving the firm, ending the existing partnership while the remaining partners continue the business.

Gaining Ratio

The ratio in which the continuing partners acquire the share of profit given up by the retiring or deceased partner.

Executor's Account

The account to which the amount due to a deceased partner is transferred for payment to the legal representatives.

Revaluation of Assets and Liabilities

Recording the changes in the values of assets and liabilities so that gains or losses up to the date of retirement or death belong to all old partners.

Retiring Partner's Loan Account

An account opened when the amount due to a retiring partner is not paid immediately but carried as a loan with interest.

Share of Goodwill

The retiring or deceased partner's portion of the firm's goodwill, compensated by the gaining partners in their gaining ratio.