Researcher

Partnership Accounts

Admission of a New Partner

CPT Section A Fundamentals of Accountancy Chapter 8 Unit 3

Prof. Deepak Jaggi

Learning Objectives

(1) Understand the reasons for which revaluation or assets

and liabilities is done.

(2) Logic of treatment of Reserves and Debit Balances in case

of admission of partner.

(3) Techniques of arriving at the various Ratio’s.

(4) Understand the Goodwill adjustment.

(5) To Lay a solid foundation of accounting treatment in case of

admission of partner.

Partnership Accounts

(Admission of a Partner)

When 2 or more Partners are already doing

business & they admit 1 more partner into their

running business it is a case of Admission of a

Partner

Cont.…

Example

Partners already doing business- A and B = Old Partners

Partner Admitted Now – C = Incoming Partner

All the three partners together – A, B & C = New Partners

Conti..

Reasons for Admission of Partner

Additional capital required

Specialized skill of the incoming partner

Expansion of Business

Avoiding competition

Profit Sharing Ratios

Types of Profits Sharing Ratios

Old Ratio – Old Partners A & B

New Ratio – New Partners A,B& C

Sacrifice Ratio - Old Partners A & B

Contd…

Old Ratio

Types of Profits Sharing Ratios

Given

Otherwise Equal

Among Old Partners

Contd…

New Ratio

Types of Profits Sharing Ratios

Given

Otherwise Apply Formulae

1 – Share of Incoming Partner = Balance Left

Balance Left x Old Ratio = New Ratio of Old

Partners

Contd…

Sacrifice Ratio

Types of Profits Sharing Ratios

Old Ratio – If Old and New Ratio of Old Partners is

same

Otherwise Apply the Formulae

Sacrifice given = Old Ratio – New Ratio

Contd…

Example of Ratios - Question

Deepika and Ranbir – Old Partners - Ratio 3:2, Aditya Admitted for ¼

share

D

R

A

3/5

2/5

x

OR =3:2

9/20

6/20

5/20

NR=9:6:5

SR=3:2

Working:

1-1/4 = ¾

D = ¾ x 3/5 = 9/20

R = ¾ x 2/5 = 6/20

A =...