Term
| THE OLD PROFIT SHARING RATIO (PSR) |
|
Definition
| THE EXISTING PSR BEFORE THE RETIREMENT OF PARTNER |
|
|
Term
| THE NEW PROFIT SHARING RATIO(PSR) |
|
Definition
| THE NEW PSR AFTER THE RETIREMENT OF A PARTNER |
|
|
Term
|
Definition
| GAINING RATIO = NEW PSR - OLD PSR (if new PSR is higher than old PSR) |
|
|
Term
|
Definition
| SACRIFICE RATIO = OLD PSR - NEW PSR (if old PSR is higher than new PSR) |
|
|
Term
| ACCOUNTING ASPECTS INVOLVED IN RETIREMENT OF A PARTNER |
|
Definition
1> ASCERTAIN NEW PSR and GAINING RATIO
2> TREATMENT OF GGODWILL
3> REVALUATION OF ASSETS & LIABILITIES
4> ADJUSTMENT OF UNRECORDED ASSETS & LIABILITIES
5> DISTRIBUTION OF ACCUMULATED PROFITS & LOSSES
6> ASCERTAINMENT OF SHARE OF PROFIT & LOSS UP TO RETIREMENT OF PARTNER |
|
|
Term
| ASCERTAINING THE AMOUNT DUE TO THE RETIRING PARTNER |
|
Definition
1> CREDIT BALANCE IN HIS CAPITAL ACCOUNT
2> CREDIT OF HIS CURRENT ACCOUNT
3> HIS SHARE OF GOODWILL
4> HIS SHARE ACCUMULATED PROFITS & RESERVES
5> HIS SHARE OF PROFITS & GAINS FROM REVALUATION OF ASSETS & LIABLITIES
6> HIS SHARE OF PROFIT & LOSS TILL THE DATE OF RETIREMENT
7> IOC & IOD TILL THE DATE OF RETIREMENT
8> SALARY & COMMISSION TILL DATE OF RETIREMENT |
|
|
Term
|
Definition
A> NORMALLY THE REMAINING PARTNERS ACQUIRE THE SHARE OF THE RETIRING PARTNER IN OLD PSR. NO NEED TO CALCULATE NEW PSR.
B>THE REMAINING PARTNERS MAY ACQUIRE SHARE IN OTHER RATION. NEED TO CALCULATE NEW PSR.
C> THE REMAINING PARTNERS MAY AGREE TO A NEW PSR. NEED TO CALCULATE NEW PSR. |
|
|
Term
|
Definition
A> WHEN GOODWILL DOES NOT APPEAR IN THE BOOKS
B> WHEN GOODWILL APPEARS IN THE BOOKS |
|
|
Term
| WHEN GOODWILL DOES NOT APPEAR IN THE BOOKS |
|
Definition
A> FULL VALUE OF GOODWILL IS RAISED & RETAINED IN THE BOOKS
B> FULL VALUE OF GOODWILL IS RAISED & WRITTEN OFF IMMEDIATELY
C> GOODWILL IS RAISED TO THE EXTENT OF RETIRING PARTNER'S SHARE & WRITTEN OFF IMMEDIATELY WITH GAINING RATIO OF REMAINING PARTNERS
D> NO GOODWILL ACCOUNT IS RAISED IN THE BOOKS & ADJUSTED DIRECTLY (DEBITED TO REMAINING PARTNERS & CREDITED TO RETIRING PARTNERS) |
|
|
