Chapter 4 - Partnership Accounts- Admission of a partner.

General Notes.
1. Reconstitution- Partnership is created by an agreement. Whenever there is a change in the existing
agreement, it amounts to reconstitution of the partnership firm.
2. Situations in which a firm is considered as reconstituted:
a) Admission of a new partner.
b) Change in profit sharing ratio among existing partners.
c) Retirement or death of a partner.
d) Amalgamation of two partnership firms.
3. Admission of a New Partner. It is a case of reconstitution of partnership in which old agreement comes
to an end and a new agreement comes into existence with all partners including the new partner.
4. Why a new partner need to be admitted? A new partner is admitted to an existing firm :
a) For providing additional capital for expansion of the business.
b) For acquiring additional managerial skill which is required for the efficient running of the business.
c) To encourage a capable employee by taking him/her into partnership. (Concept of employee
participation).
d) To increase the goodwill of the business by taking reputed and renowned person into partnership.
5. Mode of admission.
a) A new partner is admitted only with the consent of all the existing partners, unless otherwise agreed
upon.
b) A new partner acquires two rights on his admission.
i. A share in the future profits of the firm (Remember that the new partner has no rights to get a share
in the accumulated profits and past losses of the firm)
ii. A share in the assets of the firm (Here assets means net assets)
c) At the time of admission of a partner, partnership is dissolved because the firm continues its business.
Only the old partnership comes to an end and new partnership agreement comes into existence.
d) The following persons (other than a minor) are not entitled for admission to a partnership firm:
i. Person disqualified by any law.
ii. Person of unsound mind.
e) The new partner is entitled to get a specific share in the future profits of the firm, which is decided by
the existing partners
f) As the new partner gets a share in future profits of the firm, it will be the share sacrificed by old
partner(s). The ratio (if any) in which old partners sacrifice their share to new partner is called
Sacrificing Ratio. (Sacrificing share = Old share - New share).

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g) A sacrificing ratio is calculated to determine the amount of compensation that a new partner should pay
to the old partners for the share of profit sacrificed by them.
h) This compensation is called, “Premium for Goodwill”. (Remember, premium for goodwill is equal
to new partner’s share in the total goodwill of the firm. For this purpose the goodwill of the firm is
valued).
i) To record the Premium for goodwill in the books of the firm, two journal entries are passed:
i. Cash/ Bank A/c Dr ii. Premium for Goodwill A/c
Dr
To Premium for Goodwill A/c. To Sacrificing Partners’ Capital A/c.
j) A new partner can be exempted from sharing the losses of the firm (partner in profits only) with the
consent of all other partners.
6. Accounting Treatment for Admission of a new Partner. At the time of admission of a new partner,
the following adjustments are required:
(a) Adjustment of profit sharing ratio - calculation of New Ratio and Sacrifice Ratio.
(b) Adjustment of accumulated profits and losses - such profits and losses are shared among old
partners.
(c) Adjustment of profit or loss on revaluation of assets and reassessment of liabilities.
(d) Adjustment of goodwill. Valuation and treatment of goodwill.
(e) Adjustment of capital balance of the partners - adjustment of old partners’ capital in proportion to
their new profit sharing ratio and calculation of new partner’s capital in proportion to his share in the
firm.
7. Multiple Choice Questions.
A. Calculation of New Ratio and Sacrifice Ratio (students need to solve these questions)
1. L and M are partners in a firm sharing profits and losses in the ratio 7:3. N is admitted as a new
partner for 3/13th share in the profits of the firm. The new profit sharing ratio will be:
(a) 7:3:7 (b) 7:3:3 (c) 3:7:7 (d) 1:1:1
2. P and Q are partners in a firm sharing profits in the ratio 7:3. R is admitted into the firm for 2/5 th
share of profits which he takes from P and Q in the ratio 2:1. The new ratio will be:
(a) 7:3:4 (b) 13: 5:12 (c) 11:8:5 (d) 14:5:13
3. A and B are partners in a firm sharing profits in the ratio 3:2. C is admitted as a partner. The new
profit sharing ratio of A, B and C is 7:3:2. The sacrificing ratio of A and B is:
(a) 3:2 (b) 1:9 (c) 2:5 (d) 8:7
4. A and B are partners sharing profits in the ratio 5:3. They admitted C into the firm as a new partner
for 3/8th share which he acquired 2/8th from A and 1/8th from B. The new profit sharing ratio of A,
B and C will be:
(a) 3:2:3 (b) 2:3:3 (c) 5:5:6 (d) 9:1:6

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5. A, B, C and D are partners. A and B share 2/3rd of profits equally and C and D share remaining
profits in the ratio of 3:2. Find the profit sharing ratio of A, B, C and D.
(a) 5:5:3:2 (b) 7:7:6:4 (c) 25:25:8: 6 (d) 3:9:8:3
6. X and Y are partners sharing profits and losses in the ratio 5:3. On admission Z brings 70,000
in cash for his capital and 40,000 against premium for goodwill. New profit sharing ratio
between X, Y and Z is 7:5:4. The sacrificing ratio of X and Y is:
(a) 3:1 (b) 1:3 (c) 4:5 (d) 5:9
B. Treatment of Goodwill. (students need to solve these questions)
7. K and L were partners sharing profits and losses in the ratio 3:1. M was admitted for 1/5 th share in
the profits. M was unable to bring her share of goodwill premium in cash. The journal entry
recorded in the books of the firm for premium for goodwill was:
Date Particulars LF Dr. Amount Cr. Amount
M’s current a/c 24,000
Dr 8,000
To K’s Capital a/c 16,000
To L’s Capital a/c
(amount of goodwill premium adjusted
through M’s current a/c in sacrifice ratio)
The new profit sharing ratio of K, L & M will be:
(a) 41:7:12 (b) 13:12:10 (c) 3:1:1 (d) 5:3:2
8. When a new partner does not bring his share of goodwill in cash, the amount is debited to:
(a) Cash a/c. (c) Capital accounts of old partners.
(b) Current account of new partner. (d) Premium for goodwill a/c.
9. A and B are partners in a firm with capital of 1,80,000 and 2,00,000 respectively. C was
admitted for 1/3rd share in profits and C brings 3,40,000 as capital. Calculate the amount of
goodwill (Hidden Goodwill Method).
(a) 2,40,000 (b) 1,00,000 (c) 1,50,000 (d) 3,00,000
10. A and B were partners in a firm sharing profits in the ratio of 3:2. They admitted C into the firm as
a new partner. Goodwill of the firm was valued at 2,00,000. C brings his share of goodwill
premium of 20,000 in cash, which is entirely credited to A’s capital account. Calculate the new
profit sharing ratio.
(a) 5:4:1 (b) 4:5:1 (c) 3:2:1 (d) 1:1:1.
11. A and B are partners sharing profits and losses in the ratio 2:1. C is admitted for 1/4 th share of
profits which he acquires equally from A and B. C brings 30,000 as goodwill premium, it will
be credited to old partners as:
(a) 15,000 each.
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 (b) 20,000, 10,000 respectively.
(c) 10,000, 20,000 respectively.
(d) 30,000 credited to A’s capital account.
12. Shreya and Seemant are equal partners in a business that supplies handmade toys to children’s
stores. The the capital of their firm is 2,00,000. in the past 2 years, they have earned a profit of
60,000 and 80,000 respectively.
Their friends Arsh and Sejal are equal partners in a similar business that supplies handmade toys
to children’s stores. The capital of their firm is 3,00,000, with a profit at the normal rate of return
at 18,000 and 20,000 in the past two years.
Trishant decides to join the firm of Shreya and Seemant as a new partner. As goodwill calculations
are going on, Trishant changes his mind and decides to join the firm of Arsh and Sejal instead for
1/5th share in the future profits which he will get equally from Arsh and Sejal.
In order to reconstitute the firm, what elements must they now take into consideration?
(a) Only the new profit sharing ratio.
(b) Share of goodwill and new profit sharing ratio.
(c) Only the share of goodwill.
(d) Share of goodwill, new profit sharing ratio and sacrificing ratio.
C. Treatment of Accumulated Profits & Reserves. (students need to solve these questions)
13. Amar and Amal were partners in a firm sharing profits and losses in the ratio 1:5. on 1 st April 2023,
Anand is admitted to the firm for 1/5th share in the profits. On the date of Anand’s admission the
balance sheet of Amar and Amal showed a debit balance of 60,000 in the profit and loss account.
The accounting treatment for the same in the books of accounts of the firm on Anand’s admission
will be:
(a) Amar Captial a/c Dr 10,000
Amal Capital a/c Dr 50,000
To P & L a/c 60,000
(b) P & L a/c Dr 60,000
To Amar capital a/c 10,000
To Amal capital a/c 50,000
(c) Revaluation a/c Dr 60,000
To P & L a/c 60,000
(d) P & L a/c Dr 60,000
To Revaluation a/c 60,000
14. When a new partner is admitted, the balance of “General Reserve” appearing in the balance sheet
of old firm is credited to:
(a) Profit & Loss appropriation account. (c) Revaluation account.
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 (b) Capital account of all partners. (d) Capital account of old partners.
15. If, at the time of admission, some profit and loss account appears in the books, it will be transferred
to:
(a) Profit & Loss adjustment account. (c) Old partners’ capital account.
(b) Revaluation account. (d) All partners’ capital account.
16. A and B are partners sharing profits and losses in the ratio of 3:2. They admit C as a new partner
for 1/5th share in profit. C pays 1,00,000 as goodwill. The ratio of A, B and C in the new firm
would be 3:1:1. Goodwill will be credited to:
(a) Only A 1,00,000. (c) A 60,000, B 40,000.
(b) Only N 1,00,000. (d) A 75,000, B 25,000
17. P and Q share profits and losses equally. They have 20,000 each as capital. They admit R as
equal partner and goodwill of the firm was valued at 30,000. R is to bring 30,000 as his capital
and necessary cash towards his share of goodwill. Goodwill account will not remain open in the
books. If profit on revaluation is 13,000, the closing balance of the capital accounts of P, Q and
R are:
(a) 31,500; 31,500; 30,000. (c) 26,500; 26,500; 30,000.
(b) 31,500; 31,500; 20,000. (d) 20,000; 20,000; 30,000
D. Revaluation of Assets & Liabilities, Adjustment of Capital Balance of Partners.
18. A and B are partners in a firm sharing profits and losses in the ratio 4:1. On 1st April ,2023, they
admit C as a partner for 1/4th share in the profits of the firm. The balance sheet of A and B showed
Stock of 45,000. On admission of new partner, the stock was found undervalued by 10%. The
Journal Entry to give effect to the above adjustment on C’s admission will be:
(a) Revaluation a/c Dr 5,000
To Stock a/c 5,000
(b) Stock a/c Dr 4,500
To Revaluation a/c 4,500
(c) Stock a/c Dr 5,000
To Revaluation a/c 5,000
(d) Revaluation a/c Dr 4,500
To Stock a/c 4,500
19. L and M are partners sharing profits in the ratio 3:2 respectively. N was admitted for 1/5 th share of
profit. Machinery of book value 80,000 would be appreciated by 10% Building of book value
2,00,000 would be depreciated by 20%. Unrecorded debtors of 1,250 would be brought into
books new and a creditor amounting to 2,750 died and need not pay anything on this account.
What will be the profit/ loss on revaluation?

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 (a) Loss 28,000. (c) Loss 40,000.
(b) Profit 28,000. (d) Profit 40,000
20. Ganga and Jamuna are partners sharing profits and losses in the ratio of 2:1. They admit Saraswati
for 1/5th share in future profits. On the date of admission, Ganga’s capital was 1,02,000 and
Jamuna’s capital was 73,000. Saraswati brings 25,000 as her share of goodwill premium and
she agrees to contribute proportionate amount of capital in cash for her share in the business. How
much capital will be brought by Saraswati?
(a) 43,750 (b) 37,500 (c) 50,000 (d) 40,000
Or
A and B are partners sharing profits and losses in the ratio of 5:4. They admitted C for 1/5 th profit,
for which he paid 90,000 against capital and 45,000 against goodwill. Find the capital balance of
each partner taking C’s capital as base capital.
(a) 2,00,000; 90,000; 90,000. (c) 2,00,000; 160,000; 90,000.
(b) 3,00,000; 2,40,000; 1,35,000. (d) 3,00,000; 1,35,000; 1,35,000.
A. In the absence of partner’s sacrificing share, old ratio = sacrificing ratio.
B. If partners’ capitals are fixed, the new partner’s share of goodwill will be credited sacrificing
partners’ current account in place of capital account.
8. Recent Board Exam MCQs.
1. At the time of admission of a partner, the Balance Sheet of the firm showed a Workmen
Compensation Reserve (WCR) of 80,000. The claim for workmen compensation was estimated
at 1,00,000. The short fall of 20,000 will be: (March, 2024)
(a) Debited to Revaluation Account.
(b) Credited to Revaluation Account.
(c) Debited to Partners’ Capital Accounts.
(d) Credited to Partners’ Capital Account.
2. Gupta and Sharma are partners in a firm sharing profits in the ratio of 4:1. They admitted Preeti as
a new partner for 1/4th share in the profits, which acquired wholly from Gupta. New profit sharing
ratio of Gupta, Sharma and Preeti will be:(March, 2024)
(a) 2:1:1 (b) 11:4:5 (C) 3:3:2 (d) 7:5:4
3. Rohit and Mohit were partners sharing profits and losses in the ratio of 2:1. The capital Accounts
as on 31.03.2022 had a credit balance of 1,09,000 and 66,000 respectively. They admitted
Sahil as a new partner on 1st April 2022 for 1/5th share in profits. Sahil brought 25,000 as his
share of goodwill premium. He agreed to contribute capital in new profit-sharing ratio. The amount
of capital brought by Sahil was: (March 2023)
(a) 40,000 (b) 32,000 (c) 12,50,000 (d) 50,000.

56
 4. On the reconstitution of a firm, the value of the land was appreciated by 2,00,000 and Plant and
Machinery reduced to 7,00,000 from 10,00,000. Gain or Loss on revaluation will be: (2023)
(a) Gain 1,00,000. (c) Loss 5,00,000.
(b) Loss 1,00,000. (d) Gain 5,00,000.
5. Amit and Sumit were partners in a firm with fixed capitals of 6,00,000 and 4,00,000
respectively. Kavi was admitted as a new partner for 1/5th share in the profits of the firm. Kavi
brought 40,000 as his share of goodwill premium and 3,00,000 as his capital. The amount of
goodwill premium credited to Sumit will be: (March 20230)
(a) 20,000 (b) 24,000 (c) 16,000 (d) 40,000.
6. On admission of a new partner, the old partners share the gain or loss on revaluation of assets and
reassessment of liabilities in which of the following ratio: (March 2023)
(a) Equally. (c) In new profit sharing ratio.
(b) In old profit sharing ratio. (d) In sacrificing ratio.
7. Asha and Nisha were partners in a firm sharing profits and losses in the ratio 3:1. Charu was
admitted as a new partner for 1/4th share in the profits of the firm which she acquired equally from
Asha and Nisha. The new profit sharing ratio of Asha, Nisha and Charu will be: (March 2023)
(a) 3:1:4 (b) 1:1:2 (c) 5:1:2 (d) 1:2:1.
Short answer Questions (questions carrying 3 or 4 marks).
9. Aayush and Aarushi are partners sharing profits and losses in the ratio of 3:2. They admitted Naveen
into the partnership for 1/4th share. Goodwill of the firm is valued at three years’ purchased of super
profits. Average net profit of the firm was 20,000. Capital investment in the business was 50,000
and Normal Rate of Return was 10%. Calculate the amount of goodwill premium brought by Naveen.
Solution: Normal Profit = 50,000 x 10% = 5,000
Super Profit = Average Profit - Normal Profit 20,000 - 5,000 = 15,000
Goodwill = Super Profit x No. Of years’ purchase 15,000 x 3 = 45,000.
Naveen’s share of goodwill = 45,000 x 1/4 = 11,250
10. New partner brings his capital and goodwill in kind and cash. A and B are partners in a firm sharing
profits in the ratio 2:1. They admitted C as a new partner for 1/4th share in profit, which he takes equally
from A and B. C brought the following assets towards his share of capital and goodwill: Stock 20,000,
Machine 40,000, Furniture 60,000 and Cash 30,000. The Goodwill of the firm was valued at
2,00,000. Record the necessary Journal Entries for the same.
Solution:
Date Particulars LF Dr.Amount Cr. Amount
1 Stock A/c Dr 20,000
Machinery A/c Dr 40,000
Furniture A/c Dr 60,000
Cash A/c Dr 30,000
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 To Premium for goodwill A/c (2,00,000 50,000
x1/4) 1,00,000
To C’s Capital A/c (balancing figure)
(for amount of goodwill and capital brought in by
kinds by C)
2 Premium for Goodwill A/c Dr 50,000
To A’s Capital A/c 25,000
To B’s Capital A/c 25,000
(for C’s share of goodwill transferred to A & B
capital accounts in their sacrificing ratio, 1:1)
2,00,000 2,00,000
11. Hidden Goodwill and Calculation of Premium for Goodwill. A and B are partners sharing profits
and losses equally with capitals of 50,000 each. They admitted C as a new partner for 1/4th share in
profits. C brings 60,000 as his capital. Find the firm’s Hidden Goodwill and amount of premium.
Give Journal Entries for the same.
Solution:
Hidden Goodwill = Desired capital of the new firm - Existing capital of all partners.
Desired total capital of new firm = New partner’s capital / New partner’s share
= 60,000 / 1/4 = 60,000 x 4/1 = 2,40,000.
Existing total capital of new firm = 50,000 + 50,000 + 60,000 = 1,60,000.
Hidden Goodwill = 2,40,000 - 1,60,000 = 80,000.
Amount of Premium = 80,000 x 1/4 = 20,000.
Date Particulars LF Dr.Amount Cr. Amount
1 Cash A/c 60,000
Dr 60,000
To C’s Capital A/c
(for amount of capital brought in by C)
2 C’s Current a/c 20,000
Dr 10,000
To A’s Capital A/c 10,000
To B’s Capital A/c
(for transfer of C’s share of premium from his
current account to sacrificing partners’ capital
account in sacrificing ratio, 1:1)
12. Treatment for past profits and losses of the firm, at the time of admission of a partner. A and B
are partners sharing profits and losses in the ratio of 3:2. They decided to admit C into the firm for a 5 th
share in future profits. At the time of admission of C, the balance sheet of A and B showed the following
balances:
a) Profit and Loss account credit balance of 20,000
Date Particulars LF Dr.Amount Cr. Amount
1 Profit & Loss A/c 20,000
Dr 12,000
To A’s Capital A/c 8,000
To B’s Capital A/c
(for distribution of undistributed profit among A and
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 B)
b) General Reserve of 10,000.
Date Particulars LF Dr.Amount Cr. Amount
1 General Reserve A/c 10,000
Dr 6,000
To A’s Capital A/c 4,000
To B’s Capital A/c
(for distribution of general reserve among A and B)
c) Profit & Loss account debit balance of 15,000
Date Particulars LF Dr.Amount Cr. Amount
1 A’s Capital A/c 9,000
Dr 6,000
B’s Capital A/c 15,000
Dr
To Profit & Loss A/c
(for sharing of accumulated loss among A and B)
d) Workmen Compensation Reserve of 12,000
Date Particulars LF Dr.Amount Cr. Amount
1 Workmen Compensation Reserve A/c Dr 12,000
To A’s Capital A/c 7,200
To B’s Capital A/c 4,800
(for transfer of WCR in old ratio to A & B)
e) Workmen Compensation Reserve 12,000 and a claim is estimated at 2,000.
Date Particulars LF Dr.Amount Cr. Amount
1 Workmen Compensation Reserve A/c Dr 12,000
To Provision for WC Claim A/c 2,000
To A’s Capital A/c 6,000
To B’s Capital A/c 4,000
(for surplus in WCR transferred to A & B in old
ratio)
f) Workmen Compensation Reserve 12,000 and a claim is estimated at 14,000.
Date Particulars LF Dr.Amount Cr. Amount
1 Workmen Compensation Reserve A/c Dr 12,000
Revaluation A/c 2,000
Dr 14,000
To Provision for WC Claim A/c
(for shortfall of WCR charged from revaluation A/c)
2 A’s Capital A/c 1,200
Dr 800
B’s Capital A/c 2,000
Dr
To Revaluation A/c
(for loss on revaluation transferred to A & B capital
in old ratio, 3:2))
g) Investment Fluctuation Reserve Account of 60,000 and there is no change in the value of
investment.
Date Particulars LF Dr.Amount Cr. Amount
1 Investment Fluctuation Reserve A/c Dr 60,000
To A’s Capital A/c 36,000
To B’s Capital A/c 24,000
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 (for IFR transferred to A & B in old ratio)
h) Investment Fluctuation Reserve Account of 60,000 and the value of Investment is reduced from
90,000 to 70,000.
Date Particulars LF Dr.Amount Cr. Amount
1 Investment Fluctuation Reserve A/c Dr 60,000
To Investment A/c (loss on revaluation) 20,000
To A’s Capital A/c 24,000
To B’s Capital A/c 16,000
(for loss on revaluation of investment is adjusted to
IFR account and balance in IFR transferred to A & B
in old ratio)
Long Answer Questions (6 marks) Preparation of Revaluation Account, Capital Account
13. Madhav and Girdhari were partners in a firm sharing profits and losses in the ratio 3:1. their balance
sheet as at 31st March 2023 was as follows: (CBSE March 2023)
Balance Sheet of Madhav and Girdhari as on 31st March 2023.
Liabilities Amount Assets Amount
Capital: Madhav Machinery 4,70,000
3,00,000 5,00,000 Investment 1,10,000
Girdhari
2,00,000
Workmen Compensation Fund 60,000 Debtors
1,20,000
Creditors 1,90,000 Less provision BDD 1,10,000
10,000
Employee’s Provident Fund 1,10,000 Stock 1,40,000
Cash 30,000
8,60,000 8,60,000
On 1st April 2023, they admitted Jyoti into partnership for 1/4 th share in the profits of the firm. Jyoti brought
1,86,000 as her capital and 40,000 as her share of goodwill premium in cash. The following terms were
agreed upon:
i. Stock was found undervalued by 23,000.
ii. 20% of the investments were taken over by Girdhari at book value.
iii. Claim on account of workmen’s compensation amounted to 70,000, which was to be paid later.
iv. Creditors included a sum of 27,000 which was not likely to be claimed.
Prepare Revaluation Account and Partners’ Capital Account on Jyoti’s admission.
Solution:
Dr. Revaluation A/c
Cr.
Particulars Amount Particulars Amount
To Claim on WCF 10,000 By Stock 23,000
To Gain on revaluation to Capital: By Creditors 27,000
Madhav Capital 30,000
Girdhari Capial 10,000 40,000
50,000 50,000

Dr. Capital A/c of Madhav, Girdhari and Jyoti Cr.

Particulars Madhav Girdhari Jyoti Particulars Madhav Girdhari Jyoti
To Investment 22,000 By Balance b/d 3,00,000 2,00,000 ---
By Cash --- --- 1,86,000

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 By Premium 30,000 10,000 ---
To Balance c/d 3,60,000 1,98,000 1,86,000 By Revaluation 30,000 10,000 ---
a/c
3,60,000 2,20,000 1,86,000 3,60,000 2,20,000 1,86,000

Balance Sheet of Madhav, Girdhari and Jyoti as on 1st April 2023

Liabilities Amount Assets Amount
Capital: Madhav Machinery 4,70,000
3,60,000
Girdhari Investment (1,10,00 - 22,000) 88,000
1,98,000
Jyoti 7,44,000 Debtors 1,20,000
1,86,000
Claim on WCF 70,000 Less Provision BDD 1,10,000
10,000
Creditors (1,90,000 - 27,000) 1,63,000 Stock (1,40,000 + 23,000) 1,63,000
Employee’s Provident Fund 1,10,000 Cash (30,000+1,86,000+40,000) 2,56,000
10,87,000 10,87,000

(as per CBSE question paper, balance sheet is not required, but it is prepared to check the answers)
14. Anikesh and Bhavesh are partners in a firm sharing profits and losses in the ratio of 7:3. Their Balance
Sheet as on 31st March 2023 was as follows: (CBSE March 2024)
Liabilities Amount Assets Amount
Creditors 60,000 Cash 36,000
Outstanding wages 9,000 Debtors
54,000
General Reserve 15,000 Less Provision BDD 48,000
6,000
Capitals: Anikesh 1,20,000 Stock 60,000
Bhavesh 1,80,000 3,00,000 Furniture 1,20,000
Machinery 1,20,000
3,84,000 3,84,000
st th
On 1 April 2023 Chahat was admitted for 1/4 share in the profits on the following terms:
i. Chahat will bring 90,000 as her capital and 30,000 as her share of goodwill premium in cash.
ii. Outstanding wages will be paid.
iii. Stock will be reduced by 10%
iv. A creditor of 6,300, not recorded in the books, was to be taken into account.
Pass Journal Entries for the above transactions in the books of the firm.
Journal Entries in the books of the firm Anikesh, Bhavesh and Chahat
Date Particulars LF Dr.Amount Cr.Amount
1. General Reserve A/c Dr 15,000
To Anikesh Captial A/c 10,500
To Bhavesh Capital A/c 4,500
(General Reserve is distributed to old partners in old ratio)
2. Cash A/c Dr 1,20,000
To Chahat Capital A/c 90,000
To Premium for Goodwill A/c 30,000
(Chahat brings her capial and premium for goodwill in cash)
3. Premium for Goodwill A/c Dr 30,000
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 To Anikesh Capital A/c 21,000
To Bhavesh Capital A/c 9,000
(The amount of premium for goodwill is shared among old
partners in their sacrificing ratio)
4. Outstanding wages A/c Dr 9,000
To Cash A/c 9,000
(Outstanding wages were settled)
5. Revaluation A/c Dr 12,300
To Stock A/c 6,000
To Unrecorded Creditors A/c 6,300
(The loss on stock and unrecorded creditors are brought into
accounts)
6. Anikesh Capital A/c Dr 8,610
Bhavesh Capital A/c Dr 3,690
To Revaluation A/c 12,300
(The loss on revaluation account is transferred to old partners’
capital account in old ratio)
Total 1,98,600 1,98,600

Work Sheets for Accountancy.

Chapter II – Admission of a Partner (weightage 12 marks)

Module 1 Calculation of New Ratio and Sacrifice Ratio

1. A and B are partners in a firm sharing profits and losses in the ratio 3:2. On 1st April 2023, they
admit C into the firm for 1/5 share in future profits and losses. Calculate new ratio and sacrifice
ratio.
Remaining share = Total share – Share given to new partner
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New share = Remaining Share X old share.
New share of A ………………………………………………………………………………………………………………………………
New share of B ………………………………………………………………………………………………………………………………
Share of C in new denominator ……………………………………………………………………………………………………
New Ratio of A, B & C = …………………………………………………………………………………………………………………
Sacrifice Share = Old share – New Share

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Sacrifice share of A = …………………………………………………………………………………………………………………
Sacrifice share of B = …………………………………………………………………………………………………………………
Sacrifice ratio of A : B = ……………………………………………………………………………………………………………
2. P and Q are partners in a firm sharing profits and losses in the ratio 2:1. On 1st April 2022 They
admit R into the firm for 1/3 share in future profits and losses. Calculate New Ratio and Sacrifice
Ratio.
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3. K & L are partners in firm sharing profits and losses in the ratio 5:3. On 1st April 2022, they admit
M into the firm for 1/5 share in future profits and losses. Calculate the New Ratio and Sacrifice
Ratio.
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4. A, B & C are partners in a firm sharing profits and losses in the ratio 3:3:2. On 1st April 2022, they
admit D into the firm for 1/5 share in future profits and losses. Calculate New Ratio and Sacrifice
Ratio.
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5. P, Q & R are partners in a firm sharing profits in the ratio 3:2:1. They admit S for 1/6 share in
future profits. Calculate New Ratio and Sacrifice Ratio.
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Module 2 Calculation of New Ratio and Sacrifice Ratio – when new partner acquires his share from
old partners in certain ratio.
6. A and B are partners in a firm sharing profits and losses in the ratio 3:2. They admit C into the
firm for 1/5 share, which he acquires equally from A and B. Calculate New Ratio and Sacrifice
Ratio.
Calculation of share sacrificed by each old partner.
Share sacrificed by A = Share of C X Rate of sacrifice = ……………………………………………………
Share sacrificed by B = Share of C X Rate of Sacrifice = ……………………………………………………
New Share of A = Old share – Share sacrificed = ……………………………………………………………………
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New Share of B = Old share – Share Sacrificed = …………………………………………………………………
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New Ratio of A, B & C = ………………………………………………………………………………………………………………
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Sacrifice Ratio = 1:1 (the ratio at which new partner acquires his share from old partners)
7. K and L are partners sharing profits and losses in the ratio 3:2. They admit M into the firm for ¼
share in future profits and losses. M acquires his share equally from K and L. Calculate New Ratio
and Sacrifice Ratio.
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8. P and Q are partners in a firm sharing profits and losses in the ratio 5:3. They admit R into the
firm for 1/5 share in future profits and losses. R acquires his share from P and Q in the ratio 3:2.
Calculate New Ratio and Sacrifice Ratio.
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9. X and Y are partners in a firm sharing profits and losses in the ratio 3:2. They admit Z into the
firm for ¼ share in future profits and losses. Z acquires his share from X and Y in the ratio 3:1.
Calculate New Ratio and Sacrifice Ratio.
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10. A, B and C are partners in a firm sharing profits and losses in the ratio 4:3:3. They admit D into
the firm for 1/3 share in future profits and losses. D acquires his share from A, B and C in the
ratio 3:2:1. Calculate New Ratio and Sacrifice Ratio.
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Module 3 Treatment of Goodwill

11. A and B are partners in a firm sharing profits and losses in the ratio 3:2. They admit C into
the firm for ¼ share of profits. C brings 90,000 for her capital and 20,000 as premium
for goodwill. Pass Journal entries for C’s Capital and Premium for goodwill, assuming that the
premium for goodwill is retained in the business.
Date Particulars Dr. Amt Cr. Amt

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12. A and B are partners in a firm sharing profits and losses in the ratio 3:2. They admit C into
the firm for 1/5 share of profits. C brings 80,000 for her capital and 30,000 as
premium for goodwill. Pass Journal entries for C’s Capital and Premium for goodwill, assuming
that half of the premium for goodwill is retained in the business.
Date Particulars Dr. Amt Cr. Amt

13. A and B are partners in a firm sharing profits and losses in the ratio 2:1. They admit C into
the firm for 1/5 share of profits. C brings 1,20,000 for her capital and 60,000 as
premium for goodwill. Pass Journal entries for C’s Capital and Premium for goodwill, assuming
that 1/3 of the premium for goodwill is withdrawn by A and B.

Date Particulars Dr. Amt Cr. Amt

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14. A and B are partners sharing profits and losses 70% and 30% respectively. They admit C for
whom 40% profit given. C brings 1,50,000 for her capital and required amount as premium
in cash. Goodwill of the firm is valued at 1,80,000. Pass Journal entries to record C’s
capital and premium. Assume that the whole amount of premium is withdrawn.

Date Particulars Dr. Amt Cr. Amt

Module 4 Treatment of Goodwill – new partner brings only a part of premium.

15. P and Q are partners in a firm sharing profits and losses equally. They admit R into the firm
for 1/5 share in future profits. Net worth of the new firm is 5,00,000 and goodwill is
valued at 2,00,000. R brings 1, 20,000 in cash including his capital in full. Pass Journal
Entries assuming that partners capitals are fixed.

Date Particulars Dr. Amt Cr. Amt

16. K and L are partners in a firm sharing profits and losses in the ratio 5:3. They admit M into
the firm for 1/5 share which he gets equally from K and L. Net worth of new firm is fixed at
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 4,00,000 and the goodwill is valued at 80,000. M brings 90,000 including his capital
in full. Pass Journal Entries assuming that partners’ capital are fluctuating.

Date Particulars Dr. Amt Cr. Amt

17. Mohit and Rohit are partners sharing profits and losses equally. They admit Punith into the
firm for ¼ share in future profits. Punith has to bring 80,000 for his capital and required
amount of premium in cash. Goodwill of the firm is valued at 1,20,000. Punith is able to
bring 98,000 in full including his capital. Pass Journal Entries assuming that: (a) Partners’
capitals are fixed (b) Partners’ capital are fluctuating.

Date Particulars Dr. Amt Cr. Amt

Date Particulars Dr. Amt Cr. Amt

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18. Srihari and Murali are partners in a firm sharing profits and losses equally. They admit
Madhav into the firm for a 5th share in future profits. Goodwill of the firm is valued at
1,50,000. Murali brings 1,00,000 for his capital and was unable to pay premium. Pass
Journal Entries assuring that partners capitals are fixed.

Date Particulars Dr. Amt Cr. Amt

Module 5 Treatment of Goodwill – new partner brings only full /part of premium, and
goodwill already appears in the books.

19. Ajay and Bijay are partners in a firm sharing profits and losses equally. They admit Cibin into
the firm for ½ share in future, which he gets equally from Ajay and Bijay. Cibin brings
1,50,000 for his capital. Goodwill of the firm is valued at 60,000. Goodwill already appears
in the books at 20,000 and partners decided not to show any goodwill account in the books.
Pass Journal Entries, if:
(a) Cibin brings his capital and premium in full, and capital are fixed.

Date Particulars Dr. Amt Cr. Amt

(b) Cibin brings his capital and premium in full, and capitals are fluctuating.

Date Particulars Dr. Amt Cr. Amt

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 (c) Cibin brings his capital and premium in full, and Ajay and Bijay decided to withdraw
whole amount of premium.

Date Particulars Dr. Amt Cr. Amt

(d) Cibin brings his capital and premium in full, and Ajay and Bijay decided to withdraw
half of the premium.

Date Particulars Dr. Amt Cr. Amt

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 (e) Cibin brings his capital in full and 50% of premium in cash. Partners capitals are fixed.
Ajay and Bijay decided to withdraw the premium in full

Date Particulars Dr. Amt Cr. Amt

(f) Cibin brings his capital in full and 50% of premium in cash. Partners capitals are
fluctuating. Ajay and Bijay decided to withdraw the premium in full

Date Particulars Dr. Amt Cr. Amt

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 (g) Cibin brings his capital in full and no premium. Partners capitals are fixed.

Date Particulars Dr. Amt Cr. Amt

(h) Cibin brings his capital in full and no premium. Partners capitals are fluctuating.

Date Particulars Dr. Amt Cr. Amt

Module 6. Treatment of Goodwill – Hidden Goodwill

20. Ajay and Bijoy are partners in a firm sharing profits and losses in the ratio 3:2. Their capital
balance on 31st March 2022 were: 2,50,000 and 1,50,000 respectively. They admit Ravi

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 into the firm for 5th share in future profits. Ravi brings 1,50,000 for his capital and
sufficient amount of premium in cash.
a. Calculate Ravi’s share of goodwill.
b. Pass Journal entries for Ravi’s capital and premium, assuming that the amount of premium
retained in the business.

Working Notes for calculation of premium.

Hidden Goodwill = Required Capital – Actual Capital.
Required Capital = Ravi’s capital / Ravi’s share.
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Actual Capital = Capital of Ajay + Capital of Bijoy + Capital of Ravi.
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Hidden Goodwill = …………………………………………………………………………………………………………………….
Share of Ravi in Goodwill = Total Goodwill x Share of Ravi
= …………………………………………………………………………………………………….
ate Particulars Dr. Amt Cr. Amt

21. Anil and Akash are partners in a firm sharing profits and losses equally with capital balances
of 1,50,000 and 1,40,000 respectively. They admit Atul into the firm for a 5 th share in
future profits. Atul brings 1,10,000 for his capital and required amount of premium in
cash. Calculate (a) Total Goodwill of the firm, (b) Atul’s share of goodwill and (c) Pass Journal
Entries.
Solution:
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Date Particulars Dr. Amt Cr. Amt

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 Assume that half of the premium is withdrawn by Anil and Akash. Pass Journal Entries.

Date Particulars Dr. Amt Cr. Amt

Assume that whole amount of premium is withdrawn.

Date Particulars Dr. Amt Cr. Amt

Module7 Treatment of Accumulated Profits at the time of Admission of a partner.

Note. All accumulated profits given in the balance sheet to be divided among old partners in their
old ratio.
Model Journal Entry: Accumulated Profits/ Reserves a/c Dr
To Old Partners’ Capital a/c
Example: A and B are partners in partnership firm sharing profits and losses in the ratio 3:2. On
1st April 2023, they admit C into the firm for 1/5 share in future profits and losses. On the day
of admission, firm’s balance sheet showed General Reserve of 90,000 and loss on sale of old
machinery 20,000. Pass journal entry for division of Reserve. Also show the working notes:
Solution: Net Reserve to be shared = General Reserve – Loss on Sale of Machinery.
= 90,000 – 20,000 = 70,000
A’s share of Net Reserve = 70,000 x 3/5 = 42,000,
B’s share of Net Reserve = 70,000 x 2/5 = 28,000.
Journal Entry:
Date Particulars Dr. Amt Cr. Amt

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 General Reserve a/c Dr 70,000
To A’s Capital a/c 42,000
To B’s Capital a/c 28,000
(General reserve shared among A and B)
22. Ajay and Amal are partners in a firm sharing profits and losses in the ratio 2:1. On 1 st April
2023, they admit Azad into the firm for ¼ share in future profits. On the day of admission,
the firm’s balance sheet has Reserve Fund 40,000 and Deferred Revenue Expenditure
10,000. Show necessary notes and pass journal entry.
Solution:
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Date Particulars Dr. Amt Cr. Amt

23. Krupa and Kamla are partners in a firm sharing profits and losses in the ratio 3:2. On 1st April
2023, they admit Krishna into the firm for 1/5 share in future profits which she acquired
from Krupa. The balance sheet of the firm on 31st March 2023 was as follows:
Liabilities Assets
General Reserve 40,000
Cash at bank 60,000
Workmen Compensation Fund 30,000
Debtors 40,000
Creditors 60,000
Stock 50,000
Capital: Krupa 1,30,000 Machinery 80,000
Kamla 1,20,000 2,50,000
Building 1,50,000
3,80,000 3,80,000
Pass Journal Entry for distribution of accumulated reserves/ profits.
Journal Entries:
Date Particulars Dr. Amt Cr. Amt

24. In Question 104, the WCF has a liability of 18,000. Pass Journal entry for distribution of
accumulated profits/ reserves.
Journal Entries:
Date Particulars Dr. Amt Cr. Amt

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25. In Question 104, the liability on WCF is estimated at 42,000. Pass Journal entry for
distribution of profits.
Date Particulars Dr. Amt Cr. Amt

Module 8. Revaluation of assets and liabilities- Admission of a Partner.

Hints to solve the problems:
1. Decrease in the value of asset – Revaluation account Debit side.
2. Increase in the value of asset – Revaluation account Credit side.
3. Increase in the provision for BDD – Revaluation account Debit side.
4. Decrease in the provision for BDD – Revaluation account Credit side.
5. Stock undervalued – difference in Revaluation account credit side.
6. Stock overvalued – difference in Revaluation account debit side.
7. Unrecorded asset – revaluation account credit side.
8. Outstanding/ new liability- revaluation account debit side.
9. Increase in the value of liability – revaluation account debit side.
10. Decrease in the value of liability – revaluation account credit side.
11. Liability on WCF/ WAF less than WCF/ WAF – difference to partners capital account
credit side.
12. Liability on WCF/ WAF more than WCF / WAF – difference to revaluation account debit
side.
Dr. Model Revaluation Account. Cr.
Particulars (only difference) Particulars (only difference)
Asset decrease Asset increase
Provision for BDD -increase Provision for BDD – decrease
Stock overvalued Stock undervalued
Outstanding/ New liability Unrecorded asset
Liability increases Liability decreases
Liability on WCF/WAF
(increase more than fund)
Net Profit to Old Partners Net Loss to Old Partners
XXXXX XXXXX
IF CREDIT TOTAL MORE THAN DEBIT SIDE TOTAL - NET PROFIT.

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 IF DEBIT TOTAL MORE THAN CREDIT SIDE TOTAL - NET LOSS.
26. Amal and Bimal are partners in a firm sharing profits and losses in the ratio 3:2. On 1 st April
2023, they admit Kamal into the firm for 1/5 share in future profits. On 31 st March 2023,
the balance sheet of Amal and Bimal was as follows:
Liabilities Assets
General Reserve 40,000
Cash at bank 60,000
Workmen Compensation Fund 30,000
Debtors 40,000
Creditors 60,000
Stock 50,000
Capital: Amal 1,30,000 Machinery 80,000
Bimal 1,20,000 2,50,000
Building 1,50,000
3,80,000 3,80,000
Assets and liabilities revalued as follows:
a. Debtors need a provision of 5%, stock was undervalued by 3,000. Machinery
depreciated by 10%, building revalued at 1,60,000.
b. Of the creditors an amount of 3,000 ma not be cleared.
c. There was an outstanding repair bill of 2,000 to be settled.
d. The liability on workmen compensation fund estimated at 18,000.

Prepare Revaluation Account.

Dr. Revaluation Account. Cr.
Particulars Particulars

27. A and B are partners in a firm sharing profits and losses in the ratio 3:2. They admit C into
the firm for 1/4 share in future profits. The Balance sheet of the firm as on 31 st March
2023 was as follows:
Liabilities Amount Assets Amount
Creditors 50,000
Cash at bank 40,000
WCF 20,000
Debtors 60,000
Less Provision (2,000) 58,000
General Reserve 30,000
Stock 52,000
Capital: A 90,000 Machinery 50,000
B 80,000 1,70,000
Building 70,000
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 2,70,000 2,70,000
The following terms were agreed:
a. C brings 60,000 for his share of capital and 30,000 for his share of premium in cash.
The amount of premium is retained in the business.
b. Debtors need a provision of 5% for bad and doubtful debts. Stock was overvalued by 2,000.
Machinery to be depreciated by 20%. building revalued to 60,000.
c. There was an outstanding bill for repairs 4,000 to be brought to the books.
d. Liability on WCF estimated at 24,000 to be brought into the books
Prepare Revaluation Account and capital Account of the partners.
Dr. Revaluation Account. Cr.
Particulars Particulars

Dr. Capital Account of A, B and C

Cr.
Particulars Particulars

28. K and L are partners sharing profits and losses in the ratio 3:2. on 1st July 2023, they admit
M into the firm for 1/5 share in future profits. The Balance Sheet of the firm as on 31 st
March 2023 was as follows:
Liabilities Amount Assets Amount
Creditors 50,000
Cash at bank 40,000
Outstanding Bills 10,000
Debtors 60,000 57,000
Less Provision BDD (3,000)
Workmen Compensation Reserve 40,000
Stock 53,000
General Reserve 30,000
Machinery 50,000
Capital: K 80,000 Building 80,000
L 70,000 1,50,000
2,80,000 2,80,000
The following terms were agreed:
a. M brings 60,000 for his capital and 40,000 for premium in cash. Partners decided to
retain the premium in the firm.
b. Debtors all are good, no provision is required. Stock was undervalued by 7,000. Machinery
depreciated by 20% and building revalued to 60,000.

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 c. There is a bill for damages 5,000, an unrecorded investment of 10,000 to be brought
into books.
d. Liability on workmen compensation reserve is estimated at 25,000.
Prepare Revaluation Account and Capital Account of partners.
Dr. Revaluation Account. Cr.
Particulars Particulars

Dr. Capital Account of K,L and M Cr.

Particulars Particulars

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