Class 12 Accountancy - MAHARASHTRA
Reconstitution of a Partnership Firm: Admission of a Partner
The chapter 'Reconstitution of a Partnership Firm: Admission of a Partner' deals with the accounting procedures when a new partner joins an existing business. Under the Maharashtra State Board (MSBSHSE) Class 12 syllabus, students learn how to calculate new profit sharing and sacrificing ratios, revalue assets and liabilities, distribute accumulated profits and losses, adjust capital, and treat goodwill as per AS-10. This chapter is a core component of the board exam, usually appearing in the long-answer section as a comprehensive 10-mark partnership final accounts or admission problem, making mastery of ledger postings and journal entries vital for scoring high.
Start Learning FreeKey Concepts
Sacrificing Ratio
The ratio in which old partners surrender a part of their share in favor of the incoming partner. Calculated as Old Ratio minus New Ratio.
Treatment of Goodwill
Goodwill brought in cash by the new partner is distributed among old partners in their sacrificing ratio, or raised/written off as per partnership agreements.
Revaluation Account (Profit and Loss Adjustment Account)
A nominal account prepared to record the increase or decrease in the book values of assets and liabilities at the time of admission.
Distribution of Accumulated Profits and Reserves
General reserves, accumulated profits, and losses appearing in the old balance sheet are transferred to old partners' capital accounts in their old profit sharing ratio.
Adjustment of Capital
Adjusting the capital accounts of old partners based on the new partner's capital or vice versa, with the difference adjusted through cash, bank, or current accounts.
Important Formulas
Board Exam Info
In the Maharashtra State Board (MSBSHSE) Class 12 Accountancy board exam, this chapter typically carries 10 marks. It usually appears as a compulsory full-length practical problem requiring the preparation of the Revaluation Account, Partners' Capital Accounts, and the Balance Sheet of the newly constituted firm.
Frequently Asked Questions
Why is the Revaluation Account prepared during the admission of a partner?
It is prepared to ensure that assets and liabilities are shown at their current fair market values, so that the profit or loss up to the date of admission belongs exclusively to the old partners.
How is goodwill treated if the new partner brings their share of goodwill privately?
If goodwill is paid privately, no entry is passed in the books of accounts of the firm.
What happens to the existing balance of General Reserve on admission?
It is credited to the old partners' capital/current accounts in their old profit-sharing ratio before the new partner is admitted.
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