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Book-Keeping and Accountancy · Class 12 Commerce

Ch 3Reconstitution of Partnership (Admission of Partner) — Class 12 Book-Keeping and Accountancy, concept-first.

When two or more people carry on a business in partnership, the original partnership agreement rarely stays unchanged forever. New partners may need to be admitted for capital or expertise, an existing partner may retire or die, or the partners may simply agree to change how profits are shared among themselves.

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Key concepts

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Reconstitution and Admission of a Partner

Reconstitution is any change in the existing partnership agreement — admission of a partner, retirement, death, or a change in ratio among continuing partners — that alters partners' mutual rights while the firm itself c…

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Chapter contents

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1

Meaning of Reconstitution of a Partnership Firm

When two or more people carry on a business in partnership, the original partnership agreement rarely stays unchanged forever.

2

Admission of a Partner — Meaning, Reasons and Legal Position

Admission of a partner is the form of reconstitution this MSBSHSE Std XII Book-Keeping and Accountancy chapter is entirely devoted to.

3

New Profit-Sharing Ratio and Sacrificing Ratio

When a new partner is admitted, he is given a share out of the profits that used to belong entirely to the existing (old) partners.

4

Goodwill — Meaning, Factors Affecting Value, and Methods of Valuation

A firm that has been trading successfully for several years usually enjoys advantages a brand-new firm does not — an established customer base, a trusted name, favourable supplier relationships.

5

Accounting Treatment of Goodwill on Admission

Once goodwill has been valued, it must actually be brought into the books in a way that compensates the old (sacrificing) partners fairly — never the new partner, and never in the old partners' OLD ra…

6

Revaluation of Assets and Liabilities

By the date a new partner is admitted, the book values of many assets and liabilities may no longer reflect their true current worth — a building bought years ago may now be worth much more, while a d…

7

Adjustment of Accumulated Profits, Reserves and Partners' Capital

Two further items must be settled before, or at the same time as, a new partner is admitted.

Exercises

+Show 1 question1 question
  1. Q3What is meant by Reconstitution of a Partnership firm? State the different ways in which a partnership firm can be reconstituted.Preview

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 17 questions17 questions
  1. Q1Decrease in the value of assets should be ______ to Profit and Loss Adjustment Account. (a) Debited (b) Credited (c) Added (d) EqualPreview
  2. Q2Write a word/term/phrase as a substitute for the following statement: Old Ratio less New Ratio.Preview
  3. Q3Answer in one sentence only. What is revaluation account?Preview
  4. Q4Ram and Shyam were in partnership sharing profits and Losses in the proportion of 3 : 1 respectively. Their Balance sheet as on 31st March,…Preview
  5. Q5Apte and Bhate are sharing profits and losses in the ratio 3 : 2, if Kate is admitted at `1/4` share then calculate new profit sharing ratio…Preview
  6. Q6The following is the Balance sheet of partners Aditya and Chaitanya on 31 st March, 2019 they share profits and losses in the ratio of 3 : 2…Preview
  7. Q7Seeta and Geeta share profits and losses in the ratio of 3:2 in Partnership Firm. Their Balance Sheet as on 31 st March, 2020 was as under:…Preview
  8. Q8A ______ is an intangible asset. (a) Goodwill (b) Stock (c) Cash (d) FurniturePreview
  9. Q9Decrease in the value of assets should be ______ to Profit and Loss Adjustment Account. (a) Debited (b) Credited (c) Added (d) EqualPreview
  10. Q10Mr. Deepak and Mr. Abhishek were in partnership sharing profits and losses in the proportion of 3 : 1 respectively. Their Balance Sheet as o…Preview
  11. Q11A ______ is an intangible asset. (a) Goodwill (b) Stock (c) Cash (d) FurniturePreview
  12. Q12______ is credited when an unrecorded asset is brought into the business. (a) Revaluation Account (b) Balance Sheet (c) Trading Account (d)…Preview
  13. Q13Write the word/term/phrase which can substitute the following statement: Debit balance of the revaluation account.Preview
  14. Q14Write a word/term/phrase which can substitute for the following statement: Average Profit − Normal Profit =Preview
  15. Q15The Balance Sheet of Mohit and Rohit who shared profits equally, was as follows: | Balance Sheet as on 31 st March 2021 | | | | | | --- | --…Preview
  16. Q16State whether the following statement is True or False: When goodwill is paid privately, its entry in the books of accounts is not required.…Preview
  17. Q17Q. 3. Jayesh and Kamal are partners in a firm sharing profits and losses in the ratio 3 : 1. The following is their Balance Sheet as on 31st…Preview

More questions

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+Show 2 questions2 questions
  1. Q1On admission of a new partner, the profit or loss on revaluation of assets and liabilities is transferred to: (a) All partners' capital acco…Free
  2. Q2A and B share profits and losses in the ratio 3:2. They admit C for a 1/5th share, which he acquires entirely from A. The new profit-sharing…Preview
+Show 8 questions8 questions
  1. Q4A and B share profits and losses in the ratio 3:2. They admit C, giving him a 1/5th share of future profits, which he acquires equally from…Free
  2. Q5The profits of a firm for the last five years were: 2021 – ₹40,000; 2022 – ₹50,000; 2023 – ₹45,000; 2024 – ₹60,000; 2025 – ₹55,000. Goodwill…Free
  3. Q6A firm's capital employed is ₹5,00,000 and the normal rate of return in this type of business is 10% p.a. The average profit of the firm for…Free
  4. Q7A firm's capital employed is ₹5,00,000, the normal rate of return is 10% p.a., and the average profit of the firm is ₹80,000. Calculate the…Preview
  5. Q8P and Q share profits and losses in the ratio 3:2. They admit R for a 1/4th share, which he acquires entirely from P and Q in their old rati…Preview
  6. Q9X and Y are partners sharing profits and losses equally. On admission of Z, it was agreed to revalue assets and liabilities as follows: Buil…Preview
  7. Q10A and B share profits and losses in the ratio 2:1. Before admitting C into partnership, their Balance Sheet showed a General Reserve of ₹30,…Preview
  8. Q11Ram and Shyam are partners sharing profits and losses in the ratio 3:2. Their Balance Sheet as on 31st March 2025 was as follows: Balance Sh…Preview