Precautions while preparing Balance sheet of the new firm after retirement of a partner
- Capitals of the remaining partners should be as per new profit sharing ratio.
- All the Accumulated profits/losses should be shared in old profit sharing ratio or as instructed in the question, so, should not be taken to the new balance sheet, if already distributed.
- All the assets/liabilities revalued should be shown at revised values in the new balance sheet, including cash/bank balance.
- Retiring partner’s loan account must be shown in the liabilities side of the balance sheet of the new firm.