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Accounting for Withdrawal of partner from firm:
The Accounting for withdrawal of partner from the firm requires that the capital balance of retiring partner in the books of firm shall be completely closed by paying off his dues. This may occur three implications.
When the retiring partner is paid the amount equal to his balance of capital in the books, then the simple entry of payment of cash to retiring partner is made by debiting the partner capital account and crediting the cash with the amount paid.
However, when the balance shown in the books is more than the amount actually paid, then the the difference will be treated a s bonus for remaining partner and remaining partner capital shall be credited with the difference in proportion to their existing sharing ratio.
When the balance shown in the books is less than the amount actually paid, the difference will be treated as bonus for retiring partner and difference shall be taken from remaining partner in their existing sharing ratio.
The
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Horngren's Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (11th Edition)
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