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Question
What are the adjustments required on retirement of a partner from the firm?
Short Answer
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Solution
The retiring partner’s share in the firm's goodwill is calculated and adjusted. Revaluation of assets and liabilities is done to reflect current values. The retiring partner’s share of profits or losses till the date of retirement is calculated and credited or debited. Accumulated profits and reserves are distributed among all partners, including the retiring one. Finally, the amount due to the retiring partner is settled either in cash or by transferring it to a loan account.
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