Transfer of Undistributed Profit or Loss :
 

At the time of retirement of a partner, undistributed profit or loss of the old firm should be transferred to all partners’ capital accounts in their old profit sharing ratio.

The accounting treatment would be as follows:

a. For transfer of undistributed profit :

2. For transfer of undistributed loss :

Illustration :

Bhanumathi, Bharathi and Shanthi are partners sharing. profits in the ratio of 5 : 3 : 2. On April 1, 2005 Shanthi decided to retire. On
that date, there was a credit balance of Rs.60,000 in their profit and loss account. Pass entry.

Solution:

Journal Entry

Date	Particulars	L.F.	Debit Rs.	Credit Rs.
	Profit and Loss A/c                                      Dr.		60,000
	To Bhanumathi’s capital A/c			30,000
	To Bharathi’s capital A/c			18,000
	To Shanthi’s capital A/c			12,000
	(Undistributed profit transferred to capital accounts in the old ratio)