Computation of Retiring Partner’s Interest in the Firm :
The terms of the partnership agreement are to be observed while ascertaining the amount due to the retiring partner. Usually, following items are taken into consideration while calculating the total amount due to the retiring partner:
(a) Balance of the capital account of the retiring partner appearing in the ledger on the date of retirement;
(b) Share of undistributed reserve and profit (loss) in the firm;
(c) Share in firm’s goodwill;
(d) Share in the profit and loss on the revaluation of assets and liabilities;
(e) Share of profit or loss in the current year till the date of retirement,
(f) Salary and interest on capital and drawing till the date of his retirement.