SimonMash.com | Kerala Plus One & Plus Two Study Notes, Question Papers, Answer Keys, Resources

DISSOLUTION OF PARTNERSHIP vs DISSOLUTION OF FIRM Dissolution of Partnership: Termination of partnership agreement (due to admission, retirement, death, change in ratio). Business continues; only revaluation A/c prepared; no court intervention. Dissolution of Firm: Complete winding up of business. Firm ceases to exist; assets sold, liabilities paid; Realisation A/c prepared; court may intervene. MODES OF DISSOLUTION OF FIRM (5 TYPES) 1. By agreement: Partners voluntarily agree to dissolve. 2. Compulsory dissolution: On insolvency of partner or business becoming illegal. 3. By notice: In partnership at will, any partner may dissolve by serving notice. 4. On happening of contingencies: As per deed – expiry of term, death, completion of work, insolvency. 5. By court: On suit by partner – grounds: insanity, permanent incapacity, misconduct, breach, transfer of interest, business at loss, just and equitable. SETTLEMENT OF ACCOUNTS – SECTION 48 Treatment of Losses (order): ...

RETIREMENT OF A PARTNER – MEANING & ADJUSTMENTS Meaning: Partner leaves voluntarily with consent or as per deed. Firm continues with remaining partners. Retiring partner entitled to share of capital, reserves, goodwill, revaluation profit, profit up to retirement date. 9 Adjustments required: Change in PSR, Gaining ratio, Goodwill adjustment, Reserves & accumulated P&L, Revaluation A/c, Profit up to retirement date, Total amount due, Settlement of amount, Adjustment of continuing partners' capitals. NEW PROFIT SHARING RATIO & GAINING RATIO New Share = Old Share + Acquired Share. Gaining Ratio = New Ratio – Old Ratio. Ratio in which continuing partners acquire retiring partner's share. 4 Cases: Case 1: Relative ratio between continuing partners unchanged → new ratio = old ratio among them; gaining ratio = old ratio. (Madhu, Neha, Tina 5:3:2 – Madhu retires → Neha:Tina 3:2). Case 2: New ratio given directly → compute gaining ratio by subtracting old ...

MODES OF RECONSTITUTION Meaning: Change in partnership agreement while firm continues (old agreement ends, new begins). Not dissolution. Modes: Admission of new partner, Retirement of partner, Death of partner, Change in profit sharing ratio among existing partners. ADMISSION OF A NEW PARTNER Rights acquired: Right to share future profits, Right to share firm's assets. Required adjustments: New profit sharing ratio & sacrificing ratio, Goodwill valuation & treatment, Revaluation of assets & liabilities, Distribution of accumulated profits/losses (reserves), Adjustment of partners' capitals (if agreed). NEW PROFIT SHARING RATIO – CALCULATION METHODS (6 TYPES) Method 1: New partner's share given – acquired from old partners in their old ratio (implied). Example: Anil & Vishal (3:2) admit Sumit for 1/5. Remaining 4/5. Anil new = 3/5 of 4/5 = 12/25; Vishal new = 2/5 of 4/5 = 8/25; Sumit = 1/5 = 5/25. New ratio = 12:8:5. Method 2: New partner'...

CHAPTER 1: ACCOUNTING FOR PARTNERSHIP – BASIC CONCEPTS – MICRO NOTES NATURE OF PARTNERSHIP Definition (Sec 4): Relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all. Essential Features: Two or more persons (min 2, max 50), Agreement (written/oral), Lawful business, Sharing of profits, Mutual agency (every partner is agent of firm), Unlimited liability. PARTNERSHIP DEED Meaning: Document containing terms of partnership. Written deed preferable. Contents: Name, address, nature of business, capital contribution, profit sharing ratio, interest on capital/drawings/loan, salary/commission to partners, admission/retirement/death rules, dispute resolution, dissolution settlement. Provisions of Indian Partnership Act, 1932 (if Deed is silent): Profits & losses shared equally, No interest on capital, No interest on drawings, No salary/commission to partners, Interest on partner's loan @6% p.a. PARTNERS' C...