which entry when posted will show the retiring partner's account as follows:

D.'S CAPITAL ACCOUNT.

1908.

January 1, By Balance. $16,151.76
January 1, By 1/4 share

of total valuation of
goodwill

2,100.00

The retiring partner is therefore entitled to the sum of $18,151.76, to be paid in accordance with the agreement.

There is no necessity for proceeding, as Mr. Whatley states, to work out the various possible cases (page 93), for the simple reason that in any of the mentioned instances there is a deficiency. A deficiency of capital should, and must, be treated as a loss, which is to be borne according to the provision the partners have made with regard to sharing profits or losses.

Let us assume that, for the purpose of dissolution, an appraisal and revaluation of all affairs is made, and assume that the liabilities remain unchanged, but the actual realizable value of the assets (after taking into consideration the reserves) is as follows:

As our former balance sheet showed a total of assets amounting to $92,170.00, we have a deficiency of capital to the extent of $45,600.00, which deficiency is to be adjusted among the partners according to the original provision of dividing profits or losses in proportion to the capital invested, and according to the time such capital has been employed in the business.

Suppose that the firm dissolves, and sells the assets as per valuation, entailing a cost on the realization of $500.00, we would then prepare a Realization and Liquidation Account and Partners' Capital Accounts as shown on pages III and 112 respectively.

REALIZATION AND LIQUIDATION ACCOUNT OF THE FIRM OF A., B., C. AND D.

ance sheet

$92,170.00 46,070.00