Admission of a Partner Important Questions
CHAPTER - II RECONSTITUTION OF PARTNERSHIP (CHANGE IN PROFIT SHARING RATIO AMONG THE EXISTING PARTNERS, ADMISSION OF A PARTNER, RETIREMENT/DEATH OF A PARTNER)
Admission of a Partner
Learning objectives:After studying this lesson, the students will be able to: Identify and deal effectively with the situation of reconstitution of partnership. Identify the problem arising due to admission of a partner in the firm. Calculate new and sacrifice ratio in different cases. Understand, calculate and make treatment of goodwill in different cases. Make accounting treatment of the revaluation of assets and liabilities and distribute the profit and loss on revaluation among the old partners. Make accounting treatment of unrecorded assets and liabilities Prepare capital Accounts, Cash A/c and Balance Sheet of the New firm Adjust the Partners‘ Capital Accounts
Salient Points:1. Goodwill is the monetary value of business reputation. It is an intangible asset. 2. Goodwill may be of two types: a. Purchased goodwill b. Non-purchased goodwill 3. When existing firm faces problem of limited financial resources and man power then one new additional partner enters into firm. 4. There are three methods of valuation of goodwill: a. Average Profit Method b. Super Profit method c. Capitalisation Method 5. When new partner is admitted into existing partnership then existing partners have to sacrifice in favour of new partner, it is called sacrificing ratio. 22
6. Share of goodwill of new partner will be credited to sacrificing partners into their sacrificing ratio. 7. At the admission of new partner Profit & Loss on revaluation of assets and liabilities and balances of accumulated profits & losses will be distributed among old partners (only) in old ratio. Ql. At the time of change in profit sharing ratio among the existing partners, where will you record an unrecorded liability? Ans. Q2. Revaluation Account-Debit side Anand, Bhutan and Chadha are partners sharing profits in
Admission of a Partner
Learning objectives:After studying this lesson, the students will be able to: Identify and deal effectively with the situation of reconstitution of partnership. Identify the problem arising due to admission of a partner in the firm. Calculate new and sacrifice ratio in different cases. Understand, calculate and make treatment of goodwill in different cases. Make accounting treatment of the revaluation of assets and liabilities and distribute the profit and loss on revaluation among the old partners. Make accounting treatment of unrecorded assets and liabilities Prepare capital Accounts, Cash A/c and Balance Sheet of the New firm Adjust the Partners‘ Capital Accounts
Salient Points:1. Goodwill is the monetary value of business reputation. It is an intangible asset. 2. Goodwill may be of two types: a. Purchased goodwill b. Non-purchased goodwill 3. When existing firm faces problem of limited financial resources and man power then one new additional partner enters into firm. 4. There are three methods of valuation of goodwill: a. Average Profit Method b. Super Profit method c. Capitalisation Method 5. When new partner is admitted into existing partnership then existing partners have to sacrifice in favour of new partner, it is called sacrificing ratio. 22
6. Share of goodwill of new partner will be credited to sacrificing partners into their sacrificing ratio. 7. At the admission of new partner Profit & Loss on revaluation of assets and liabilities and balances of accumulated profits & losses will be distributed among old partners (only) in old ratio. Ql. At the time of change in profit sharing ratio among the existing partners, where will you record an unrecorded liability? Ans. Q2. Revaluation Account-Debit side Anand, Bhutan and Chadha are partners sharing profits in