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Accountancy · Class 12 Commerce

Ch 5Admission of a Partner — Class 12 Accountancy, concept-first.

A partnership firm often needs more capital, more management skill, or wider business contacts than its existing partners can provide. When this happens, the partners may decide to admit a new person into the firm as a partner.

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Key concepts

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Revaluation of Assets and Liabilities

On admission, assets and liabilities are revalued to their current worth so that any profit or loss on this revaluation — and any accumulated reserve or undistributed profit/loss already sitting in the old balance sheet…

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Chapter contents

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1

Meaning and Effects of Admission of a New Partner

A partnership firm often needs more capital, more management skill, or wider business contacts than its existing partners can provide.

2

New Profit-Sharing Ratio and Sacrificing Ratio

Whenever a new partner is admitted, two ratios must be worked out before any other adjustment can be made: the New Profit-Sharing Ratio (NPSR) — the ratio in which all partners, old and new, will shar…

3

Accounting Treatment of Goodwill on Admission

Goodwill represents the value of a firm's reputation, customer loyalty, and established business connections — value that the old partners built up through their own effort before the new partner arri…

4

Revaluation of Assets and Liabilities, and Distribution of Reserves

On the date a new partner is admitted, the values of assets and liabilities recorded in the firm's books may no longer reflect their true current worth — a building may have appreciated, stock may hav…

5

Adjustment of Capital and the New Balance Sheet

After goodwill, revaluation, and reserves have all been accounted for, partners sometimes agree that their capital balances should bear a specific, sensible relationship to the New Profit-Sharing Rati…

Exercises

+Show 3 questions3 questions
  1. Q11M and N are partners sharing profits in the ratio of 3:2. Their Balance Sheet as at 31st March 2024 showed: Capitals — M ₹80,000, N ₹60,000;…Free
  2. Q12P and Q are partners sharing profits in the ratio of 3:2, with capitals of ₹1,20,000 and ₹80,000 respectively (after all other adjustments).…Preview
  3. Q13S and T are partners sharing profits in the ratio of 3:2. Their Balance Sheet as at 31st March 2024 is given below: | Liabilities | ₹ | Asse…Preview

Sample & Board Papers

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

+Show 27 questions27 questions
  1. Q1If the old profit sharing ratio is more than the new profit sharing ratio of a partner, the difference is called : (a) Solvency ratio (b) Ca…Preview
  2. Q2Anbu and Raju are partners, sharing profits in the ratio of 3 : 2. Akshai is admitted as a partner. The new profit sharing ratio among Anbu,…Preview
  3. Q3Seenu and Siva are partners sharing profits and losses in the ratio of 5 : 3. In view of Subbu's admission, they decided : (i) To increase t…Preview
  4. Q4(a) Amal and Vimal are partners in a firm sharing profits and losses in the ratio of 7 : 5. Their balance sheet as on 31st March, 2019 is as…Preview
  5. Q5Which of the following statements is not true in relation to admission of a partner ? (a) The firm is reconstituted under a new agreement (b…Preview
  6. Q6Revaluation Account is a ________. (a) Personal Account (b) Real Account (c) Impersonal Account (d) Nominal AccountPreview
  7. Q7On revaluation, the increase in liabilities leads to : (a) Loss (b) Profit (c) Gain (d) None of thesePreview
  8. Q8What is sacrificing ratio ?Preview
  9. Q9What are the adjustments required at the time of admission of a partner ?Preview
  10. Q10Distinguish between sacrificing ratio and gaining ratio.Preview
  11. Q11(a) Sriram and Raj are partners sharing profits and losses in the ratio of 2 : 1. Nelson joins as a partner on 1st April, 2017. The followin…Preview
  12. Q12On Revaluation, the increase in the value of assets leads to : (a) Loss (b) Expense (c) Gain (d) None of thesePreview
  13. Q13At the time of admission, the goodwill brought by the new partner may be credited to the Capital accounts of : (a) the new partner (b) all t…Preview
  14. Q14Sam and Jose are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April 2018, they admitted Joel as a partner. On…Preview
  15. Q15Revaluation A/c is a : (a) Personal A/c (b) Real A/c (c) Impersonal A/c (d) Nominal A/cPreview
  16. Q16James and Kamal are sharing profits and losses in the ratio of 5 : 3. They admit Sunil as a partner giving him 1/5 share of profits. Find ou…Preview
  17. Q17Praveena and Dhanya are sharing profits in the ratio of 7 : 3. They admit Malini into the firm. The new ratio among Praveena, Dhanya and Mal…Preview
  18. Q18Rajesh and Ramesh are partners sharing profits and losses in the ratio of 3 : 2. Raman is admitted as a new partner and the new profit shari…Preview
  19. Q19Select the odd one out. (a) Revaluation Profit (b) Investment fluctuation fund (c) Goodwill brought by new partner (d) Accumulated LossPreview
  20. Q20At the time of admission, the Goodwill brought by the new partner may be credited to the Capital accounts of whom ? (a) The new partner (b)…Preview
  21. Q21Ananth and Suman are partners sharing profits and losses in the ratio of 3 : 2. They admit Saran for 1/5 share, which he acquires entirely f…Preview
  22. Q22Kayalvizhi, Maanvizhi and Kuzhali are partners, sharing profits and losses in the ratio of 5 : 3 : 2. As from 1st April 2023, Vanmathi is ad…Preview
  23. Q23(a) Veena and Pearl are partners in a firm sharing profits and losses in the ratio of 2 : 1. Their Balance Sheet as on 31st March 2018 is as…Preview
  24. Q24On Revaluation, the increase in the value of assets leads to : (a) Loss (b) Expense (c) Gain (d) None of thesePreview
  25. Q25If the old profit sharing ratio is more than the new profit sharing ratio of a partner, the difference is called : (a) Sacrificing ratio (b)…Preview
  26. Q26What is meant by Revaluation of assets and liabilities ?Preview
  27. Q27What are the adjustments required at the time of admission of a partner ?Preview

More questions

+Show 10 questions10 questions
  1. Q1Why is it necessary to revalue the assets and liabilities of a firm at the time of admission of a new partner, and why is the resulting prof…Free
  2. Q2Explain the meaning of Sacrificing Ratio. Under what circumstances can the sacrificing ratio be different from the old profit-sharing ratio…Free
  3. Q3A and B are partners sharing profits and losses in the ratio of 3:2. They admit C into partnership, giving C a 1/5th share of profits. Nothi…Free
  4. Q4X and Y are partners sharing profits in the ratio of 5:3. They admit Z into partnership. Z acquires his share of 3/10th from X and Y in the…Preview
  5. Q5P, Q and R are partners sharing profits in the ratio of 5:3:2. They admit S as a new partner, and it is agreed that the new profit-sharing r…Preview
  6. Q6A and B are partners sharing profits equally. They admit C for a 1/4th share in profits. The goodwill of the firm is valued at ₹80,000. C br…Preview
  7. Q7M and N are partners sharing profits in the ratio of 3:2. They admit O for a 1/5th share in profits. The goodwill of the firm is valued at ₹…Preview
  8. Q8D and E are partners sharing profits in the ratio of 3:2. Their capitals, after all other adjustments, stand at ₹60,000 and ₹40,000 respecti…Preview
  9. Q9G and H are partners sharing profits in the ratio of 2:1. On admission of a new partner, the following revaluations are agreed: Building (bo…Preview
  10. Q10J and K are partners sharing profits in the ratio of 3:2. Their Balance Sheet shows a General Reserve of ₹30,000, a credit balance of Profit…Preview