Page 1 - Lesson Note 1

Class-XI

Accountancy

Topic – RETIREMENT OF A PARTNER

Introduction and New Profit Sharing Ratio/Gaining Ratio

1. Meaning of Retirement Retirement of a partner means ceasing to be a partner

of the firm.
The different ways by which a partner can retire from the firm are

(i) With the consent of all the partners.

(ii) By giving notice in writing to all other partners of his intention to retire, in case

of partnership at will.

(iii) In accordance with the terms of agreement between the partners.

Liability of a Partner
Liability of the Firm for the Acts before Retirement [Section 32(2)] A retiring

partner remains liable for all the acts of the firm up to the date of his retirement.
However, a retiring partner may be discharged from his liability by an agreement

between himself, third party and the continuing partners.
Liability of the Firm for the Acts after Retirement [Section 32 (3)] A retiring

partner also continues to be liable to third parties for the acts of the firm even
after his retirement until a public notice of his retirement is given.

Various matters that need accounting adjustment at the time of retirement are:

(i) Determination of new profit sharing ratio

(ii) Determination of gaining ratio