Class 12 Accountancy - TAMILNADU
Reconstitution of a Partnership Firm: Admission of a Partner
The chapter 'Reconstitution of a Partnership Firm: Admission of a Partner' in Class 12 Accountancy under Tamil Nadu Samacheer Kalvi syllabus deals with the procedures adopted when a new partner is introduced into an existing business. Reconstitution changes the mutual rights and obligations of the partners. This chapter is vital for board exams as it covers essential adjustments such as calculation of new profit sharing ratio and sacrificing ratio, treatment of goodwill, revaluation of assets and liabilities, and the distribution of accumulated profits and losses. Mastery of these concepts is crucial for solving comprehensive 6-mark and 8-mark practical problems in the higher secondary board examinations.
Start Learning FreeKey Concepts
Sacrificing Ratio
The ratio in which the old partners surrender a portion of their share of profit in favour of the newly admitted 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 partners in their sacrificing ratio to compensate them for the loss of their profit share.
Revaluation of Assets and Liabilities
A nominal account prepared at the time of admission to record the increase or decrease in the value of assets and liabilities so that they are shown at their true current values.
Accumulated Profits and Reserves
Existing general reserves, profit and loss account credit balance, and other funds appearing in the old balance sheet belong exclusively to the old partners and are transferred to their capital accounts in the old profit sharing ratio.
Adjustment of Capital
Sometimes new or old partners adjust their capitals in proportion to their profit sharing ratio, either by bringing in additional cash or through their current accounts.
Important Formulas
Board Exam Info
In the Tamil Nadu (Samacheer Kalvi) Class 12 Accountancy board exam, this chapter is a high-scoring section carrying approximately 10 to 15 marks. Questions typically include 1-mark objective questions, 3-mark short answers on calculations of ratios or treatment of goodwill, and a major 6-mark or 8-mark compulsory practical problem involving Revaluation Account, Capital Accounts, and the final Balance Sheet of the reconstituted firm.
Frequently Asked Questions
Why is the Revaluation Account prepared upon the admission of a partner?
It is prepared to adjust the book values of assets and liabilities to their current market values so that the new partner neither gains nor loses due to past appreciation or depreciation.
How is goodwill treated if the new partner brings their share of goodwill privately?
If the new partner pays the goodwill amount privately to the sacrificing partners, no entry is passed in the books of the firm.
What happens to the existing general reserve shown in the old balance sheet during admission?
The existing general reserve is distributed among the old partners in their old profit sharing ratio by crediting their capital accounts before the new partner joins.
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