Solution to Admission of Partner in CH-2 Account by SC Sharma

Admission of partner is an important concept in the field of accounting. It refers to the process of including a new partner in an existing partnership firm. Here are the steps involved in admission of partner:

1. Calculation of the new profit sharing ratio:
The first step in admitting a new partner is to determine the new profit sharing ratio. This is done by taking into account the capital contributed by the new partner, the profit earned by the firm and any other factors that may affect the profits of the firm.

2. Revaluation of assets and liabilities:
The next step is to revalue the assets and liabilities of the firm. This is done to ensure that the new partner is admitted at a fair value. Any increase or decrease in the value of assets and liabilities is adjusted in the capital accounts of the existing partners.

3. Adjustment of goodwill:
If the new partner is bringing in goodwill, then it needs to be adjusted in the books of accounts. This is done by crediting the existing partner’s capital accounts and debiting the new partner’s capital account.

4. Adjustment of reserves and accumulated profits:
Any reserves or accumulated profits that have been built up over the years need to be adjusted. This is done by transferring a portion of these profits to the capital accounts of the existing partners.

5. Preparation of new balance sheet:
Once all the adjustments have been made, a new balance sheet is prepared. This balance sheet reflects the new profit sharing ratio and the capital accounts of all the partners.

In conclusion, admission of partner is a complex process that requires careful consideration of a number of factors. It is important to ensure that the new partner is admitted at a fair value and that the existing partners are compensated for any increase in profits that may result from the admission of the new partner.

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