Class 12 Accountancy- Admission of a Partner[Simple Notes]
📘 1. Meaning of Admission of a Partner
When a new person joins an existing partnership firm and contributes capital, skills, or both, it
is called admission of a partner.
The new partner gets a share in future profits.
📘 2. Why a Partner is Admitted?
1. To bring more capital
2. To increase efficiency
3. To expand business
4. To bring new skills
5. To reduce workload of existing partners
📘 3. Important Adjustments at the Time of Admission
A) New Profit-Sharing Ratio
After new partner’s admission, partners share profits in a new ratio.
Formula:
New Ratio = Old Ratio × (1 – New Partner’s Share)
(Then add new partner’s share separately if given)
B) Sacrificing Ratio
Old partners give up part of their share for the new partner.
Formula:
Sacrificing Ratio = Old Ratio – New Ratio
If positive → it is a sacrifice.
C) Treatment of Goodwill
Goodwill is compensation to old partners for their sacrifice.
, Two ways:
1. Premium Method (New partner brings goodwill in cash)
Goodwill is distributed to sacrificing partners in sacrificing ratio.
2. Adjustment Method (No cash brought)
New partner’s share of goodwill is adjusted through partners’ capital accounts.
D) Revaluation of Assets & Liabilities
To record any gain or loss in the value of assets and liabilities.
Use:
Revaluation Account
If asset ↑ = Profit
If asset ↓ = Loss
If liability ↑ = Loss
If liability ↓ = Profit
Profit → Old partners’ capital A/c
Loss → Old partners’ capital A/c
E) New Partner’s Capital
The new partner brings capital in proportion to the new ratio.
Sometimes based on total capital of firm.
F) Adjustments of Reserves & Accumulated Profits
General Reserve / P&L (Cr) is distributed to old partners only, in their old ratio.
📘 4. Calculation Examples (Very Simple)
Example 1 – Sacrificing Ratio
A and B share profits 3:2. C is admitted for 1/5 share.
New Ratio = Total – C’s Share = 1 – 1/5 = 4/5
A’s new share = 3/5 × 4/5 = 12/25
B’s new share = 2/5 × 4/5 = 8/25
C’s share = 5/25
📘 1. Meaning of Admission of a Partner
When a new person joins an existing partnership firm and contributes capital, skills, or both, it
is called admission of a partner.
The new partner gets a share in future profits.
📘 2. Why a Partner is Admitted?
1. To bring more capital
2. To increase efficiency
3. To expand business
4. To bring new skills
5. To reduce workload of existing partners
📘 3. Important Adjustments at the Time of Admission
A) New Profit-Sharing Ratio
After new partner’s admission, partners share profits in a new ratio.
Formula:
New Ratio = Old Ratio × (1 – New Partner’s Share)
(Then add new partner’s share separately if given)
B) Sacrificing Ratio
Old partners give up part of their share for the new partner.
Formula:
Sacrificing Ratio = Old Ratio – New Ratio
If positive → it is a sacrifice.
C) Treatment of Goodwill
Goodwill is compensation to old partners for their sacrifice.
, Two ways:
1. Premium Method (New partner brings goodwill in cash)
Goodwill is distributed to sacrificing partners in sacrificing ratio.
2. Adjustment Method (No cash brought)
New partner’s share of goodwill is adjusted through partners’ capital accounts.
D) Revaluation of Assets & Liabilities
To record any gain or loss in the value of assets and liabilities.
Use:
Revaluation Account
If asset ↑ = Profit
If asset ↓ = Loss
If liability ↑ = Loss
If liability ↓ = Profit
Profit → Old partners’ capital A/c
Loss → Old partners’ capital A/c
E) New Partner’s Capital
The new partner brings capital in proportion to the new ratio.
Sometimes based on total capital of firm.
F) Adjustments of Reserves & Accumulated Profits
General Reserve / P&L (Cr) is distributed to old partners only, in their old ratio.
📘 4. Calculation Examples (Very Simple)
Example 1 – Sacrificing Ratio
A and B share profits 3:2. C is admitted for 1/5 share.
New Ratio = Total – C’s Share = 1 – 1/5 = 4/5
A’s new share = 3/5 × 4/5 = 12/25
B’s new share = 2/5 × 4/5 = 8/25
C’s share = 5/25
