Class 12 Accountancy — Chapter 2: Reconstitution of a Partnership Firm – Admission of a Partner

What you'll learn

• ▸Modes of Reconstitution of a Partnership Firm
• ▸Key Adjustments on Admission of a Partner
• ▸Calculating the New Profit Sharing Ratio (NPSR)
• ▸Calculating the Sacrificing Ratio
• ▸Valuation and Accounting Treatment of Goodwill
• ▸Revaluation of Assets and Reassessment of Liabilities
• ▸Adjustment for Accumulated Profits, Losses, and Reserves
• ▸Adjustment of Partners' Capitals

Chapter Summary

--- PAGE 1 --- Reconstitution of a Partnership Firm – Admission of a Partner 2 LEARNING OBJECTIVES After studying this chapter you will be able to: • Explain the concept of reconstitution of a partnership firm; • Identify the matters that need adjustments in the books of firm when a new partner is admitted; • Determine the new profit sharing ratio and calculate the sacrificing ratio; • Define goodwill and enumerate the factors that affect it; • Explain the methods of valuation of goodwill; • Describe how goodwill will be treated under different situations when a new partner is admitted; • Make necessary adjustments for revaluation of assets and reassessment of liabilities; • Determine the capital of each partner, if required according to the new profit sharing ratio and make necessary adjustments; • Make necessary …

Practice Questions from this Chapter

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1. Explain goodwill simply. Get Solution →
2. Calculate new partner's share. Get Solution →
3. Define partnership reconstitution. Get Solution →
4. What is the term for any change in the existing agreement of a partnership that results in a new agreement? Get Solution →
5. According to the Partnership Act 1932, what is required to admit a new partner, unless otherwise stated in the deed? Get Solution →
6. What are the two primary needs of a firm that lead to the admission of a new partner? Get Solution →
7. What are the two main rights that a newly admitted partner acquires in the firm? Get Solution →
8. What is the additional amount a new partner contributes to compensate sacrificing partners for their loss of share in super profits called? Get Solution →

Did you know?

• 💡 Some family businesses have existed as partnerships for over 500 years.
• 💡 The oldest written business contract dates back to ancient Sumer, around 2000 BC.
• 💡 Ant colonies operate like complex partnerships, with millions of ants sharing specialized roles.
• 💡 New partners in Roman societies sometimes brought land or livestock instead of just money.
• 💡 "Goodwill" as a legal business term first appeared in English court records in the 16th century.

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