What treatment is made of accumulated profits and losses on the retirement of partner?

Post category:Accountancy
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SOLUTION

Accumulated profits are credited to the Capital Accounts of old partners in their old ratio and accumulated losses are debited to their Capital Accounts in old ratio.

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A, B and C are partners sharing profits in the ratio of 3 : 2 : 1. B retired and the new profit-sharing ratio between A and C was 2 : 1. On B’s retirement, the goodwill of the firm was valued at Rs. 90,000. Pass necessary Journal entry for the treatment of goodwill on B’s retirement.

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