Class 12 Accountancy - UP
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 is introduced into an existing business. Under UPMSP guidelines, students learn how to calculate new profit-sharing ratios, sacrifice ratios, and account for accumulated profits, losses, and reserves. This chapter is crucial for board exams as it forms the foundation for comprehensive long-answer practical questions involving revaluation of assets, reassessment of liabilities, and adjustment of capital accounts. Mastering these adjustments ensures accuracy in preparing the balance sheet of the reconstituted firm.
Start Learning FreeKey Concepts
Sacrificing Ratio
The proportion in which old partners give up their share of profit in favour of the newly admitted partner.
New Profit Sharing Ratio
The ratio in which all partners, including the new partner, will share future profits and losses of the firm.
Treatment of Goodwill
The method of compensating existing sacrificing partners by bringing in premium for goodwill either privately or through the firm's accounts.
Revaluation Account
A nominal account prepared to record the increase or decrease in the book value of assets and liabilities at the time of admission.
Adjustment of Reserves and Accumulated Profits
Distributing existing general reserves, accumulated profits, and losses among old partners in their old profit-sharing ratio.
Important Formulas
Board Exam Info
In the Uttar Pradesh (UPMSP) Class 12 Accountancy board examination, this chapter typically carries significant weightage, often appearing as an 8 to 10-mark long-answer practical question. Common question types include calculating the new profit-sharing and sacrificing ratios, passing journal entries for the treatment of goodwill and reserves, and preparing the Revaluation Account, Partners' Capital Accounts, and the final Balance Sheet of the new firm.
Frequently Asked Questions
What is the difference between sacrificing ratio and gaining ratio?
Sacrificing ratio is calculated during admission when old partners give up a share of their profit to the new partner. Gaining ratio is calculated during retirement or death when remaining partners acquire the outgoing partner's share.
How is unrecorded asset treated at the time of admission?
An unrecorded asset is credited to the Revaluation Account since it represents a gain, and it is shown on the asset side of the new balance sheet.
Is the preparation of Revaluation Account mandatory upon admission?
Yes, it is necessary to record the true and fair values of assets and liabilities so that the new partner neither gains nor loses due to past appreciation or depreciation.
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