Retirement/Death of a Partner> Reserves and Accumulated Profits/Losses

A. Distribution of Reserves and Accumulated Profits (in Old Ratio):

When distributing accumulated profits (e.g., General Reserve, Reserve Fund, P&L Credit Balance):

General Reserve A/c                          ...Dr.

Reserve Fund A/c                              ...Dr.

Profit & Loss A/c (Credit balance)   ...Dr.

      To Old Partner's Capital A/cs or Current A/cs

B. Distribution of Specific Reserves (Only Surplus):

If only the surplus amount is to be distributed (e.g., Workmen's Compensation Reserve, IFR):

Workmen's Compensation Reserve A/c      ...Dr.

Investment Fluctuation Reserve A/c           ....Dr.

           To All Partners' Capital A/c or Current A/c

C. Distribution of Accumulated Losses (in Old Ratio):

When accumulated losses (e.g., P&L Debit Balance, Advertisement Suspense A/c) are transferred:

All Partners' Capital A/c or Current A/c       ...Dr.

        To Profit & Loss A/c (Debit Balance)

        To Advertisement Suspense/Expenditure A/c

D. Adjustment of Reserves/Profits Through Gaining and Sacrificing Partners:

1. In Case of Net gain (Profit):

Gaining Partners' Capital/Current A/cs     ...Dr.

      To Sacrificing Partner's Capital/Current A/cs

2. In Case of Net Loss:

Sacrificing Partners; Capital/Current A/c     ...Dr.

     To Gaining Partners' Capital/Current A/cs

Net Effect = Accumulated Profits + Reserves - Accumulated Losses.

               Calculation of Gain/(Sacrifice) of each Partner