Admission of a Partner

1. Old partnership come to an end and new partnership begin.

2. Rights of a new partner

2.1. 1. Right to share future profit of the firm.

2.2. 2. Right to share in the assets of the firm.

2.3. 3. He is liable for any liability of the business incurred after admission .

3. Effect of admission of a partner

3.1. Adjustment is made for reserves, accumulated profit and losses.

3.2. Assets are revalued and liability are reassessed.

4. Preparation of Revaluation a/c

4.1. Cr. Items 1. Decreases in liability. 2. Increase in assets.

4.2. Dr. Items 1. Decrease in assets. 2. Increase in liability.

5. Adjustment required on admission of partner.

5.1. 1. Change in profit sharing ratio. • New share= old share - sacrifice share

5.2. 2. Valuation of goodwill. • Goodwill paid privately ( No general entry will be passed) •Goodwill is paid in cash by new partner and retained in business ° Old partner capital/ current a/c.....dr To goodwill a/c (Being existing goodwill is return off in old ratio) • Goodwill os brought in cash by new partner and is withdrawn by sacrificing partner fully or Partly °Cash a/c....dr To premium for goodwill a/c ° Premium foro goodwill a/c...dr To sacrificing a/c ° Sacrificing partner capital a/c...dr To cash a/c

5.3. 4. Adjustment of Deferred revenue expenditure. These are revenue expenditure in nature but are written off in more than one accounting year considering that it's benifit will accure to business for the period in which it is written off.

5.4. 3. Revaluation of assets and reassessment of liability. The change in value of assets and liabilities is adjusted through an account title Revaluation account or p&l app a/c.

5.5. 5. Accounting of reserves, accumulated profit and losses If at the time of admission of admission of a partner , balance in reserves, accumulated profit and losses exists in balance sheet. They are transferred to old partner capital in their old profit sharing ratio.