Chapter 5: Admission of a Partner
When a partner is admitted to the existing partnership firm, it is called admission of a partner.
Details
An existing partnership firm may take up expansion/diversification of the business. In that case it may need managerial help or additional capital. In such cases, one option for the partnership firm is to admit new partner/partners. When a partner is admitted to the existing partnership firm, it is called admission of a partner. On the admission of a new partner, the partnership firm is reconstituted with a new agreement.
Let's look at an example:
Rekha and Nitesh are partners sharing profit in the ratio of 5:3. On April 1, 2014 they admitted Nitu as a new partner with 1/4th share in the profit of the firm. In this case, with the admission of Nitu as partner, the firm stands reconstituted.
On the admission of a new partner, the following adjustments become necessary:
(i) Adjustment in profit sharing ratio;
(ii) Adjustment of Goodwill;
(iii) Adjustment for revaluation of assets and reassessment of liabilities;
(iv) Distribution of accumulated profits and reserves; and
(v) Adjustment of partners’ capitals
Curriculum
-
Exercise Q3 - 6 to 1324 m 14 s
-
Pg 205 Q4 (1 and 2)22 m 16 s
-
Pg 205 Q4 (3 to 6)33 m 9 s
-
Pg 205 Q4 (7 to 10)29 m 42 s
-
Pg 205 Q4 (11, 12, 13)21 m 57 s
-
Pg 207 (Q5, Q6)22 m 15 s
-
Pg 208 Q814 m
-
P1 Ch5 Class 6 Sum 9 Admission of a Partner
-
Pg 209/211 - Q10, Q1134 m 9 s
-
Pg 211 Q1314 m 38 s
-
Pg 211/212 - Q 14/Q1524 m 29 s
-
Pg 211 - Q1617 m 23 s
-
pg 213 Q1714 m 49 s
-
Pg 214 Q18, 1932 m 34 s
-
1. How is a new partner admitted in a firm ?1 m
-
2. For what purpose a new partner is admitted in a firm ?1 m
-
3. State necessary accounting adjustments at the time of the admission or a new partner.1 m
-
4. State rights of a new partner.1 m
-
5. Why are assets and liabilities revalued at the time of admission of a new partner?1 m
-
6. Why a new partner is required to give his share in goodwill?1 m
-
7. What is sacrificing ratio? How it is calculated?1 m
-
8. Explain with reasons the accounting treatment of reserves and accumulated profit and loss appearing in the books of the firm at the time of the admission of a new partner.1 m
-
9. When is revaluation account debited/credited?1 m
-
10. State provision for the goodwill as per accounting standard-26.1 m
-
Practice Quiz20 questions
-
1. Write the names of methods for accounting effects related to goodwill at the time of admission of a new partner.1 m
-
2. When is memorandum of Revaluation Account prepared?1 m
-
3. In which ratio profit or loss amount is distributed (which arrived in the first phase) of memorandum of Revaluation Account ?1 m
-
4. In which ratio profit or loss amount is distributed (which arrived in the second phase) of memorandum of Revaluation Account ?1 m
-
5. At which value goodwill is shown in the new balance sheet, at the time of admission of a new partner?1 m
-
6. How can partners of a partnership firm enter a new partner in a business ?1 m
-
7. To which account profit or loss of Revaluation Account is to be recorded ?1 m
-
8. To which account bad debts reserve amount is to be transferred when a new partner is admitted ?1 m
-
9. In which ratio is the amount credited in partners account when goodwill account is to be created?1 m
-
10. When new partner brings his share of goodwill in cash, in which ratio is it to be distributed among old partners?1 m
-
11. What type of an account is revaluation account?1 m
-
12. At the time of revaluation if the debts value decreases or increases then ion which side of revaluation account would it be recorded?1 m
-
13. In which ratio, future profit or loss is to be distributed among all partners after admission of a new partner?1 m
-
14. In which ratio accumulated reserves and funds are to be distributed among partners?1 m
-
15. Which account is to be opened to record changes in the values of assets and liabilities at the time of admission of a new partner ?1 m
-
16. At the time of admission of a new partner if sacrifice ratio or new profit-loss ratio is not given then what is the sacrifice ratio for old partners ?1 m
-
17. Partners A and B admitted C as a new partner. At that time revaluation of goodwill is less than the book value of goodwill. Pan journal entry for the same.1 m
-
18. Admission of a partner in a firm is one type of _______ for partners.1 m
-
19. Which two ratios are to be calculated at the time of admission of a partner?1 m
-
20. What is premium for goodwill?1 m
-
21. What is the accounting effect for the goodwill premium paid privately by the new partner?1 m
-
Chapter 5 Practice Material1.2 MB
-
One Line Answer and Theory1.1 MB
- 5.1 hours of content
- 31 texts
- 1 quiz
- 2 PDFs
- 57+ students
- 24x7 support
Students' feedback
