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Question

Identify various matters that need adjustments at the time admission of a new partner .

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Solution

When a new partner gets admitted in the firm, there are various items that are needed to be adjusted. These items are as follows

(i) Profit Sharing Ratio: When a partner gets admission in the firm, first of all, the new profit sharing ratio is required to be calculated.

(ii) Goodwill: Another item which needs a special concentration is Goodwill. It is necessary to evaluate and adjust the amount of Goodwill among the partners in as per their sacrificing ratio.

(iii) Revaluation of Assets and Liabilities: Assets and liabilities should also be revalued at the time of the admission of a new partner and the profit or loss due to the revaluation should be distributed among the old partners.

(iv) Distribution of Profit/Loss (if any): When a new partner gets admission in the firm he is not supposed to participate in old profit hence the old profit/loss should be distributed in old partners in their old profit sharing ratio.


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