Class 12 Accountancy - WEST-BENGAL
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 process when a new partner is introduced into an existing firm. It covers critical adjustments required at the time of admission, including the calculation of new profit-sharing ratio and sacrificing ratio, treatment of goodwill as per AS-26, revaluation of assets and reassessment of liabilities, distribution of accumulated profits and losses, and adjustment of capital. Mastering this chapter is vital for the West Bengal Council of Higher Secondary Education (WBCHSE) board exams, as comprehensive 6 or 8-mark numerical problems from this topic regularly appear.
Start Learning FreeKey Concepts
Sacrificing Ratio
The ratio in which old partners surrender a part of their share in favor of the incoming partner. It is calculated as Old Ratio minus New Ratio.
Treatment of Goodwill
Accounting for the premium for goodwill brought in cash or privately by the new partner, or raised/written off according to AS-26 to compensate sacrificing partners.
Revaluation Account
A nominal account prepared to record the increase or decrease in the book values of assets and liabilities so that they are shown at current values upon admission.
Accumulated Profits and Reserves
Undistributed profits, general reserve, and accumulated losses appearing in the old balance sheet are transferred to old partners' capital accounts in their old profit-sharing ratio.
Adjustment of Capitals
Adjusting the capital accounts of old partners in proportion to their new profit-sharing ratio based on the new partner's capital or total capital of the firm.
Important Formulas
Board Exam Info
In the West Bengal (WBCHSE) Class 12 Accountancy board exam, this chapter typically carries around 8 to 10 marks. Questions usually feature a comprehensive 6-mark or 8-mark numerical problem involving the preparation of Revaluation Account, Partners' Capital Accounts, and the new Balance Sheet, along with short 1 or 2-mark theoretical or ratio calculation questions.
Frequently Asked Questions
Why is the Revaluation Account prepared upon the admission of a partner?
It is prepared to ensure that assets and liabilities are shown at their true current market values, and any resulting profit or loss belongs solely to the old partners.
How is goodwill treated if the new partner brings their share of goodwill in cash?
The amount brought in as premium for goodwill is credited to the sacrificing partners' capital accounts in their sacrificing ratio.
What happens to general reserve appearing in the old balance sheet during admission?
General reserve is distributed among the old partners in their old profit-sharing ratio before the new partner is admitted.
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