Retirement of a Partner Treatment for Furniture Sold for Rs. 20000

Retirement of a partner is one of the major changes that can occur in a partnership. It refers to the withdrawal of a partner from the partnership business. In the case of furniture sold for Rs. 20000, if the payment was received by cheque at the time of retirement of a partner, the treatment can be explained as follows:

1. Recording the sale of furniture

The first step in retirement treatment is to record the sale of furniture in the books of accounts. The entry for the sale of furniture will be as follows:

Cash/Bank A/c Dr. 20,000
To Furniture A/c 20,000

2. Recording the payment received by cheque

The payment received by cheque will be recorded in the books of accounts as follows:

Bank A/c Dr. 20,000
To Cash/Bank A/c 20,000

3. Treatment of the retiring partner's capital account

The retiring partner's capital account will be settled after all the assets and liabilities have been distributed among the remaining partners as per the partnership deed. The amount due to the retiring partner will be paid off from the remaining partners' capital accounts in profit-sharing ratio. The entry for the settlement of the retiring partner's capital account will be as follows:

Retiring Partner's Capital A/c Dr. X
To Partner A's Capital A/c (Profit Sharing Ratio) Y
To Partner B's Capital A/c (Profit Sharing Ratio) Z

Where X is the amount due to the retiring partner, Y is the share of partner A in the partnership profits, and Z is the share of partner B in the partnership profits.

4. Treatment of goodwill

If there is any goodwill in the partnership, it will be valued and distributed among the remaining partners in the profit-sharing ratio. The entry for the distribution of goodwill will be as follows:

Goodwill A/c Dr. P
To Partner A's Capital A/c (Profit Sharing Ratio) Q
To Partner B's Capital A/c (Profit Sharing Ratio) R

Where P is the value of goodwill, Q is the share of partner A in the partnership profits, and R is the share of partner B in the partnership profits.

In conclusion, the retirement of a partner involves settling the retiring partner's capital account, distributing any goodwill, and recording the sale of assets. If the payment for the sale of assets is received by cheque, it should be recorded in the books of accounts accordingly.