Class 12 Accountancy - BIHAR
Reconstitution of a Partnership Firm: Admission of a Partner
The chapter 'Reconstitution of a Partnership Firm: Admission of a Partner' in Class 12 Accountancy deals with the financial and legal adjustments required when a new partner joins an existing firm. For Bihar (BSEB) board students, this is a high-scoring chapter that tests your knowledge on calculating new profit-sharing ratios, sacrificing ratios, accounting treatment for goodwill, revaluation of assets and liabilities, and the adjustment of accumulated profits and reserves. Mastering this chapter is essential because it forms the foundation for subsequent chapters like retirement and dissolution of a partnership firm, frequently appearing as long practical questions in board exams.
Start Learning FreeKey Concepts
New Profit-Sharing Ratio
It is the proportion in which all partners, including the newly admitted partner, will share the future profits and losses of the firm.
Sacrificing Ratio
The ratio in which the old partners surrender a part of their share in favor of the new partner. It is calculated as Old Ratio minus New Ratio.
Treatment of Goodwill
Goodwill brought in by the new partner is distributed among the sacrificing old partners in their sacrificing ratio to compensate them for the loss of future profits.
Revaluation of Assets and Liabilities
A Revaluation Account is prepared to record the increase or decrease in the value of assets and liabilities so that the new partner does not gain or lose from past changes.
Adjustment of Reserves and Accumulated Profits
Any accumulated profits, general reserves, or losses existing in the balance sheet before admission belong strictly to the old partners and are transferred to their capital accounts in the old profit-sharing ratio.
Important Formulas
Board Exam Info
In the Bihar (BSEB) Class 12 Accountancy board exam, this chapter typically carries around 8 to 12 marks. Questions usually include 1 or 2 objective/short-answer questions and one mandatory 6-mark or 8-mark long practical problem covering revaluation account, partners' capital accounts, and the final balance sheet.
Frequently Asked Questions
Why is the sacrificing ratio calculated during a partner's admission?
The sacrificing ratio is calculated to distribute the premium for goodwill brought in by the incoming partner among the old partners in proportion to the sacrifice they make.
What happens to accumulated losses appearing in the balance sheet upon admission?
Accumulated losses are debited to the old partners' capital accounts in their old profit-sharing ratio before the new partner is admitted.
Is the Revaluation Account prepared on nominal account rules?
Yes, the Revaluation Account is a nominal account where all decreases in asset values and increases in liabilities are debited, and increases in assets and decreases in liabilities are credited.
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