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Admission of A Partner Part 1

Admission of partner class12

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115 views3 pages

Admission of A Partner Part 1

Admission of partner class12

Uploaded by

a20755064
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DPUE

ACCOUNTANCY

Chapter 3

Reconstitution of a Partnership Firm:: Admission of a Partner


Reconstitution of Partnership Firm: An end to the existing agreement and a
new agreement coming into effect with a changed relationship among the
members of the partnership firm and/or their composition is termed as
Reconstitution of a partnership firm.

Modes of Reconstitution of Partnership Firm:

• Change in Profit sharing ratio

• Admission of a partner

• Retirement of a partner

• Death of a partner

Meaning of admission: the process of taking a person as a new partner into an


existing partnership firm is called admission of a partner. For example, A and B
are partners in a partnership firm, they decide to take C into their partnership
as a new partner.

Rights of a new partner:

 Right to share the assets of the business


 Right to share profits of the business in future

Purpose of admission:

 To increase capital resources of the business


 To enhance managerial skills and competencies
 To expand the activities of the business, and so on

Important points on Admission:

A. New profit sharing ratio;

B. Sacrificing ratio;

C. Valuation and adjustment of goodwill;

D. Revaluation of assets and Reassessment of liabilities;

E. Distribution of accumulated profits and reserves; and

F. Adjustment of partners’ capitals.


A) New profit sharing ratio:

• Meaning: Ratio in which all partners (both old and new) share future
profits of the firm after admission.

• Purpose of calculation:

– Share future profits

– Adjust partners’ capitals

• Formula:

New share (NS) = Old Share (OS) – Share Sacrificed (SS)

Calculation of New Profit Sharing Ratio under different situations:

1) When sacrificed shares of old partners are given

• New share = old share – share sacrificed

2) When sacrifice ratio is given

• Calculate share sacrificed – Sacrifice Ratio * New Partner’s share

• New share = old share – share sacrificed

3) When old partners surrender a part of their share to the new partner

• Calculate share sacrificed – old share * Surrender share

• New share = old share – share sacrificed

4) When old ratio of old partners and share of new partner are given

• Calculate Remaining share, Remaining Share = 1 – New Partner’s


share

• Divide Remaining Share in old ratio

5) When share of new partner and Ratio in which remaining share shared
by old partners are given

• Calculate Remaining share, Remaining Share = 1 – New P’


share

• Divide Remaining Share in agreed ratio

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