My query is regarding a partnership firm engaged in MANUFACTURING ACTIVITY having two partners. The Facts are as under:
Now one of the partner "B" wants to discontinue this partnership. Hence the other partner "A" has agreed to this and wants to continue this business under the same name and wants to admit two new partners and retire partner "B" by paying a lump sum amount for his capital and goodwill.
My query is :
1) From Accounting Point of view: What shall be the accounting effects of the above? How will the lump sum payment to partner " b" booked in the accounts books and how will the new capital introduced by the new partners shown in the books?
2) From Law point of view:
What happens to the existing : a) Excise Registration? b) Vat Registration? c) Sales Tax Regstration? d) Pan of the firm? e) Import Export Licence?
Is new registration required for the above or what have to be done to intimate the respective authorities to intimate the change in constitution of the firm?
31 January 2008
when there are two partners and one retires ........it becomes a case of dissolution of firm.....because the firm can not survive with one partner. To save this situation it is better to induct the partneres first and then retire.Then the firm will continue its existence, and the registrations under various acts will continue , because it is only change in constitution of the firm .Howerver, as required under respective laws , intimation for change in constitution will be required.
From accouting point of view ,amount paid to the retiring partner , in excess of his capital contribution is nothing but payemnt agaist goodwill of the firm . Before inducting new partners , GOODWILL a/c can be debited and old partners accoutn credited . The excess paid to the retiring partner is his share of goodwill, on that basis value of total goodwill of the firm can be ascertained and accounted for accordingly.
CAclubindia
