Class 12 Accountancy - HARYANA
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 scenario when a new partner joins an existing business. For Haryana (BSEH) board exams, this is a crucial high-scoring chapter that forms the foundation for partnership accounting. Students learn how to calculate new profit-sharing ratios, sacrifice ratios, and how to account for accumulated profits, losses, reserves, and the revaluation of assets and liabilities. It also covers the treatment of goodwill as per Accounting Standard 26, ensuring that the incoming partner compensates existing partners for their sacrifice.
Start Learning FreeKey Concepts
New Profit Sharing Ratio
The proportion in which all partners, including the incoming partner, will share future profits and losses of the firm.
Sacrificing Ratio
The ratio in which old partners surrender a part of their share in favor of the new partner, calculated as Old Ratio minus New Ratio.
Treatment of Goodwill
The process of valuing and recording goodwill brought in by the new partner or raised in the books to compensate sacrificing partners.
Revaluation of Assets and Liabilities
Preparing a Revaluation Account to record the increase or decrease in the value of assets and liabilities at the time of admission so that gains or losses belong to old partners.
Adjustment of Capitals
Adjusting the capitals of old and new partners in proportion to their profit-sharing ratio as per the partnership agreement.
Important Formulas
Board Exam Info
In the Haryana (BSEH) Class 12 Accountancy board exam, this chapter typically carries significant weight, contributing around 8 to 12 marks. Common question types include a 1 or 2-mark calculation of sacrificing ratio, short numericals on the treatment of goodwill, and a comprehensive 6 or 8-mark long-answer question involving the preparation of Revaluation Account, Partners' Capital Accounts, and the Balance Sheet of the reconstituted firm.
Frequently Asked Questions
What is the difference between sacrificing ratio and gaining ratio?
Sacrificing ratio is calculated at the time of admission of a partner when old partners give up a share of profit. Gaining ratio is calculated at the time of retirement or death of a partner when remaining partners acquire an extra share.
How is unrecorded asset treated at the time of admission?
An unrecorded asset is credited to the Revaluation Account because it results in a gain for the firm, and it is shown on the asset side of the new Balance Sheet.
Is Revaluation Account the same as Profit and Loss Adjustment Account?
Yes, Revaluation Account is also known as Profit and Loss Adjustment Account as it adjusts the book values of assets and liabilities to their current market values.
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