Class 12 Accountancy - PUNJAB
Reconstitution of a Partnership Firm: Admission of a Partner
The chapter 'Reconstitution of a Partnership Firm: Admission of a Partner' in PSEB Class 12 Accountancy deals with the process of bringing a new partner into an existing business. When a new partner is admitted, the old partnership deed comes to an end and a new agreement is created among all partners. You will learn how to calculate new profit-sharing ratios, sacrifice ratios, treatment of goodwill, revaluation of assets and liabilities, and adjustment of accumulated profits and reserves. This is a high-scoring chapter that frequently appears in board exams as long-answer practical questions.
Start Learning FreeKey Concepts
Sacrificing Ratio
The ratio in which old partners surrender their share of profit in favor of the incoming partner, calculated as Old Ratio minus New Ratio.
Treatment of Goodwill
The incoming partner brings premium for goodwill to compensate old partners for their sacrifice in future profits, which is distributed among old partners in their sacrificing ratio.
Revaluation Account
A nominal account prepared at the time of admission to record the increase or decrease in the value of assets and liabilities, with the resulting profit or loss transferred to old partners' capital accounts.
Accumulated Profits and Losses
Reserves, accumulated profits, and losses appearing in the old balance sheet are distributed among old partners in their old profit-sharing ratio before admission.
Adjustment of Capitals
Sometimes capitals of all partners are adjusted according to the new profit-sharing ratio and the new partner's capital, often using current or cash accounts for differences.
Important Formulas
Board Exam Info
In the Punjab School Education Board (PSEB) Class 12 Accountancy exam, this chapter typically carries around 6 to 8 marks. Questions usually include a comprehensive 6-mark practical problem involving the Revaluation Account, Partners' Capital Accounts, and the final Balance Sheet.
Frequently Asked Questions
Why is the Revaluation Account prepared upon a partner's admission?
It is prepared to record the true current values of assets and liabilities so that any unrecorded gain or loss belongs strictly to the old partners before the new partner joins.
How is goodwill treated if the new partner cannot bring cash for their share of goodwill?
In such cases, the new partner's current account is debited, and the old partners' capital accounts are credited in their sacrificing ratio.
Is the sacrificing ratio always equal to the old ratio?
No, the sacrificing ratio is equal to the old ratio only when the new partner acquires their share from the old partners in their respective old profit-sharing ratio.
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