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

Chapter 2: Reconstitution of a Partnership Firm – Admission of a Partner is a chapter in Class 12 Accountancy (Part 1), part of the CBSE NCERT curriculum followed by over 25 million students across India. This chapter covers 8 topics including Modes of Reconstitution of a Partnership Firm, Key Adjustments on Admission of a Partner, Calculating the New Profit Sharing Ratio (NPSR). BrainWeave provides free AI-powered explanations — by voice or text, in Hindi or English — with no signup required.

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What you'll learn

▸Modes of Reconstitution of a Partnership Firm

ReconstitutionAdmissionRetirementChange in PSR
▸Key Adjustments on Admission of a PartnerCore concept

Admission of PartnerAccounting AdjustmentsGoodwillRevaluation
▸Calculating the New Profit Sharing Ratio (NPSR)Core concept

New Profit Sharing RatioNPSRRemaining ShareSurrendered Share
▸Calculating the Sacrificing RatioCore concept

Sacrificing RatioOld ShareNew ShareSacrifice
▸Valuation and Accounting Treatment of GoodwillCore concept

GoodwillPremium for GoodwillValuation of GoodwillSacrificing Partners
▸Revaluation of Assets and Reassessment of LiabilitiesCore concept

Revaluation AccountRevaluation ProfitAssetsLiabilities
▸Adjustment for Accumulated Profits, Losses, and ReservesCore concept

Accumulated ProfitsGeneral ReserveReservesOld Partners
▸Adjustment of Partners' Capitals

Capital AdjustmentProportionate CapitalNew CapitalCurrent Accounts

Chapter Summary

Understanding the various circumstances that lead to a change in the partnership agreement, such as the admission of a new partner, changes in the profit-sharing ratio among existing partners, retirement of a partner, and death of a partner.

Identifying the primary accounting adjustments required when a new partner joins a firm. This includes calculating new ratios, treating goodwill, revaluing assets and liabilities, distributing reserves, and adjusting capital accounts.

Mastering the calculation of the new profit sharing ratio for all partners (old and new) based on different scenarios of how the new partner acquires their share from the existing partners.

Learning to calculate the ratio in which the old partners sacrifice their share of profit in favour of the new partner. The formula is Old Share minus New Share, and this ratio is crucial for the distribution of goodwill.

Understanding the concept of goodwill, the methods for its valuation, and the accounting treatment for the premium for goodwill brought in by the new partner to compensate the sacrificing partners.

Learning how to adjust the book values of assets and liabilities to their current market values at the time of admission by preparing a Revaluation Account and distributing the resulting profit or loss among the old partners.

Understanding the accounting treatment for reserves, accumulated profits, and losses appearing in the balance sheet at the time of admission. These are typically distributed to the old partners in their old profit sharing ratio.

Learning the advanced procedure of adjusting the capital of all partners to be proportionate to their new profit sharing ratio. This often involves bringing in or withdrawing cash by partners.

Practice Questions from this Chapter

Tap "Get Solution" on any question to ask our AI tutor.

Explain goodwill simply. Get Solution →
Calculate new partner's share. Get Solution →
Define partnership reconstitution. Get Solution →
What is the term for any change in the existing agreement of a partnership that results in a new agreement? Get Solution →
According to the Partnership Act 1932, what is required to admit a new partner, unless otherwise stated in the deed? Get Solution →
What are the two primary needs of a firm that lead to the admission of a new partner? Get Solution →
What are the two main rights that a newly admitted partner acquires in the firm? Get Solution →
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.

Frequently Asked Questions

How many topics are covered in this chapter?

This chapter covers 8 key topics: 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, and more. The BrainWeave AI tutor explains each one with examples.

Is Chapter 2: Reconstitution of a Partnership Firm – Admission of a Partner important for board exams?

Yes — Class 12 is a CBSE board exam year, and every NCERT chapter is part of the syllabus. Use BrainWeave's AI tutor to master this chapter, then practice with the auto-generated quizzes and mind maps.

Can I get NCERT solutions for this chapter in Hindi?

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Related Chapters

Chapter 1: Accounting for Partnership: Basic Concepts

Chapter 3: Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Chapter 4: Dissolution of Partnership Firm

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