Purchasing of Partner's Interest
When a partner retires from the business, the partner's interest may be purchased directly by one or more of the remaining partners or by an outside party. If the retiring partner's interest is sold to one of the remaining partners, the retiring partner's equity is merely transferred to the other partner.
For example, assume that Partner C's equity is sold to Partner B. The entry for the transaction on the books of the partnership is as follows:
| Debit | Credit | |
|---|---|---|
| Partner C, Capital | 30,000 | |
| Partner B, Capital | 30,000 |
The amount paid to Partner C by Partner B is a personal transaction and has no effect on the above entry. Any gain or loss resulting from the transaction is a personal gain or loss of the withdrawing partner and not of the business.
If the retiring partner's interest is purchased by an outside party, the retiring partner's equity is transferred to the capital account of the new partner, Partner D.
| Debit | Credit | |
|---|---|---|
| Partner C, Capital | 30,000 | |
| Partner D, Capital | 30,000 |
The amount paid to Partner C by Partner D is also a personal transaction and has no effect on the above entry.
Read more about this topic: Partnership Accounting
Famous quotes containing the words purchasing, partner and/or interest:
“Fashion is the most intense expression of the phenomenon of neomania, which has grown ever since the birth of capitalism. Neomania assumes that purchasing the new is the same as acquiring value.... If the purchase of a new garment coincides with the wearing out of an old one, then obviously there is no fashion. If a garment is worn beyond the moment of its natural replacement, there is pauperization. Fashion flourishes on surplus, when someone buys more than he or she needs.”
—Stephen Bayley (b. 1951)
“Plantin’ and readin’, plantin’ and readin’. Fill a man full of lead, stick ‘em in the ground, and then read words on ‘em. Why when ya killed a man, why try to read the Lord in as a partner on the job.”
—Borden Chase [Frank Fowler] (1900–1971)
“The English public, as a mass, takes no interest in a work of art until it is told that the work in question is immoral.”
—Oscar Wilde (1854–1900)