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Class-XII

Accountancy

Topic – ADMISSION OF A PARTNER

Admission of a Partner

How can a New Partner be Admitted
According to section 31(1) of Indian Partnership Act 1932, a person can be
admitted as a new partner only with the consent of all exiting partners.

A new partner is needed into the business due to the following reasons:-
1. When more capital is needed for the expansion of the business.

2. When a competent and experienced person is needed for the efficient
running of the business.

3. To increase the goodwill and reputation of the business by taking a
reputed and renowned Person into the partnership.

4. To encourage a capable employee by taking him into the partnership

Following Adjustments are needed at the time of the admission of a
new partner :-

1. Calculation of new profit sharing ratio.
2. Accounting treatment of goodwill.
3. Accounting treatment for revaluation of Assets and Liabilities.
4. Accounting treatment of reserves and accumulated profits.
5. Adjustment of capitals on the basis of new profit sharing ratio.

Calculation of New Profit Sharing Ratio:

1. When only the ratio of new partner is given in the question, then in the
absence of any instructions. It is presumed that the old partner will continue