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DK Goel Solutions Class 12 Accountancy Volume 1 Chapter 4

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Last updated date: 16th Apr 2024
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MVSAT 2024

Studying in Detail: Retirement or Death of a Partner

Retirement of a partner means the withdrawal of his or her partnership from a firm. This can be done with (i) prior notice by the partner, (ii) existing agreement of sorts, and (iii) all partners’ consent. The retirement or demise of a partner leads to the reconstitution of the agreement between existing partners. Students can Download DK Goel accountancy Class 12 solutions Chapter 4 PDF for Perform well in Examination.

The various problems that might arise due to the retirement of a partner might not be completely understood without solving problems on them. The solutions of DK Goel Class 12 Chapter 4 break down calculations of such problems into simple steps for an easy understanding for students. 

All About a Partner's Retirement

A partner may decide to leave or retire from the firm for a variety of reasons, including poor health, advanced age, a change in the nature of the business, and so on. A partner in a partnership at will may retire at any moment. Retirement causes a reorganization of a firm in which the contribution ratio and profit sharing ratio of the partners change. The departing partner receives his share of the company's capital, revaluation profit or loss, and goodwill.

Let us now go through each topic in-depth of reconstitution of a partnership firm–retirement/death of a partner:

  • Accounting Treatments

  • Profit-Sharing Ratio 

  • Gaining Ratio

  • Adjusting Goodwill

 

Accounting Treatments

On a partner’s retirement or death, existing partnership deeds need to be terminated to make way for a new settlement that deals with adjusting calculations, like changes in profit sharing ratios, amounts due to the retiring partner, etc. The solution of DK Goel Class 12 chapter 4 PDF provides detailed steps to calculate such problems. Let us have a look at the important terms and what they mean.

 

Profit-Sharing Ratio 

As the name suggests, the profit-sharing ratio is the proportion in which partners of firms share profits and losses of their business. The ratio in which continuing partners will share future profits after one partner’s retirement or death is called a new profit-sharing ratio.

Question 1 of retirement or death of a partner Class 12 DK Goel solutions demonstrates alternate situations of different partners retiring and how that will affect the existing Profit-Sharing Ratio.

The old profit-sharing ratio among X, Y, Z is known. In individual cases leading to X’s retirement, Y’s retirement, and Z’s retirement, since no new profit-sharing ratio of remaining partners is given, it is assumed they acquire shares in the old ratio.

 

Gaining Ratio

A gaining ratio is a financial technique that helps determine the proportion by which the surviving partners of a business will share the earnings of an existing partner in the case of his death or retirement. The gaining ratio is the ratio by which they split earnings. It can also be described as the difference between the previous and subsequent profit-sharing ratios. On the retirement of a partner, the ratio in which shares of existing partners are divided among the remaining partners is known as the gaining ratio.

Question 2 in DK Goel Accountancy Class 12 solutions Chapter 4 PDF focuses on calculating new profit-sharing ratios of continuing partners, based on a given data which can be understood to figure out the gaining ratio.

It is known how A, B, and C are used to share profits. It is also said that on B’s retirement, his share is evenly divided between A and C, meaning the gaining ratio is 1:1. This information is used to calculate their student's amare gain. Adding this data to their old individual shares gives the new shares, which are then used to calculate the new profit-sharing ratio between A and C.

Question 4 in DK Goel solutions Class 12 chapter 4, on the other hand, presents a scenario where the gaining ratio is directly given, and the new ratio needs to be calculated based on that. The old ratio, in which A, B, and C used to share profits, is known. On C’s retirement, the ratio in which C’s shares will be divided between A and B is also known. Using the given gaining ratio, the shares that A and B will individually gain is calculated. Their new shares are added to their old individual shares to determine the new profit-sharing ratio between A and B.

 

Adjusting Goodwill

In accounting, goodwill is defined as an intangible asset that reflects the value generated by the business. Goodwill has a broad definition and is frequently utilized when one firm acquires another.

Goodwill is the price that a corporation is willing to pay to acquire another company at a price that is greater than its market worth.

Company goodwill comprises intangible assets like brand name, valuable employee associations, well-grounded consumer base, and so on.

  • A retiring partner is entitled to his share of company goodwill since he had contributed to it.

  • The remaining partners are liable to pay for the retiring partner’s share of goodwill according to their respective gaining ratio, as per existing agreements.

This concept has been employed to solve Question 3 in DK Goel Accountancy Class 12 solutions chapter 4 PDF. The profit-sharing ratio among four partners A, B, C, and D is known. There is a goodwill amount during C’s retirement, which is also known. Here this company already possesses goodwill in its books.

For knowing the share of goodwill continuing partners are liable to pay C, at first gaining ratios of A, B, and D has been calculated. According to this calculated gaining ratio, C’s share of goodwill has been updated in its journal entry.

DK Goel Solutions Class 12 Chapter 4 provides insight into important conceptual problems on retirement or death of a partner in Accountancy. It enhances the critical thinking and problem-solving abilities of students to help them prepare better for their upcoming board exams where they are expected to be encountering sums based on similar concepts.

Accounting is an important subject in the commerce curriculum and hundreds of students work hard to secure good grades in the subject. A strong foundation from the beginning is essential to understand and build your interest in the subject. And because of its essential simplicity, it is one of the most popular disciplines among commerce students.

However, simply mugging up the theories before the exam will not benefit students. Accountancy is all about acquiring a clear grasp of concepts, reasoning, and the know-how to apply them realistically. Achieving full marks in the subject is a possible reality, with practice and hard work. At the beginning of the academic year, you must create a timetable on how to approach the syllabus and leave ample time to practice and revise at the end.

In a student's academic life, this is one of the most crucial points and it’ll be less stressful and easy to navigate if one is disciplined and dedicated towards their goals for the Class 12 board exam. These results will help students in getting admission to top-tier educational institutions in the future. With that said, students need to give their best to every subject in their stream. 

 

Tips for Preparing for the Class 12 Accountancy Exam

Here are some pointers to help students avoid mistakes, save time, and get the most out of their preparation  —

  • Prioritize comprehension over memorization of chapters. Understanding the principles and logic of the themes is critical when dealing with accounting issues.

  • The key to obtaining excellence is practice. Effectively practicing different chapters allows students to solidify their knowledge.

  • Make a timetable and keep note of how much time you spend on each chapter. Use your time wisely and focus on the important topics.

  • While studying, prepare notes of all the important points in a chapter. This will not only help you understand better but will also make revision in the future easier.

  • Regularly give mock tests, solve previous year's papers and practise papers in books - practice will help you memorize approaches to questions.

  • All of the calculations should be practiced without the use of calculators. Your basic math too must be strengthened to solve questions fast and with accuracy. 

Access Other Chapters of DK Goel Solutions Class 12 Accountancy Volume 1 

Access Other Chapters of DK Goel Solutions Class 12 Accountancy Volume 2

Important Topics Links Related to Class 12 Accountancy Volume 1 Chapter 4

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FAQs on DK Goel Solutions Class 12 Accountancy Volume 1 Chapter 4

1. What are some important concepts in chapter 4 from DK Goel Solutions Class 12 Retirement or Death of a Partner?

Some important concepts in Retirement or Death of a Partner Class 12 DK Goel Solutions involve various adjustment calculations that need to be done after the retirement of a partner, like:

  • Calculating Gaining Ratio and Net Profit Ratio.

  • Sharing Goodwill.

  • Revaluating Liabilities and Assets.

  • Distributing Profits and Losses.

  • Retiring Partner’s Due Amount.

2. What are the different changes caused due to a Retiring Partner and a Dead Partner?

Retirement of a partner takes place when a shareholder decides to exit a partnership firm on his own will and withdraw his company shares into his account. It can be done only at the end of an accounting year.


The death of a partner can happen at any time of a year, and in this case shares of the deceased partner are transferred to his executive’s loan account on his behalf.

3. Where can I find Solution of DK Goel Class 12 Chapter 4?

Retirement or Death of a Partner Class 12 DK Goel Solutions is formulated with expert guidance on concepts applied in sums which provide step-wise explanations to make Accountancy students for the preparation of board exams.


You can find DK Goel Solutions Class 12 Retirement or Death of a Partner on Vedantu, absolutely free.

4. How is a Partner's retirement treated?

A partner in a partnership at will can retire at any moment he wishes for any reason. A retirement causes a reorganization of a firm which requires the contribution ratio and profit sharing ratio of the remaining partners to change. The departing partner receives his share of the company's capital, revaluation profit or loss, and goodwill. The following need to be calculated:

  • Accounting Treatments

  • Profit-Sharing Ratio 

  • Gaining Ratio

  • Adjusting Goodwill

5. How to prepare for the Class 12 Accountancy exam?

Here are some tips to make the most of your preparation: 

  • Prioritize comprehension over memorization of chapters. Understanding the principles and logic of the themes is critical in accounts.

  • With accounts, you must practice and revise at the end of each chapter and then finally at the end of your syllabus. 

  • Once you have completed the syllabus, move ahead to solving practice papers, past question papers and the material available on Vedantu.  

  • Minimize the use of calculators during regular practice, so even during the exam, you are not required to use it.