practical problems of admission of Related: Chapter Notes - Reconstitution of a Partnership Firm: Admission of a Partner - Accountancy, Class 12

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practical problems of admission of Related:  Chapter Notes - Reconstitution of a Partnership Firm: Admission of a Partner - Accountancy, Class 12

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A partnership firm earned net profits during the last five years as  1st year 40000. 2 nd year 50000. 3Ed year 55000. 4the year 70000. 5the year 85000 answer

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Practical Problems of Admission of a Partner

Admitting a new partner into a partnership firm can bring about several practical problems that need to be addressed for the smooth functioning of the business. Some of the common practical problems of admission of a partner are:

Change in Profit Sharing Ratio
- The admission of a new partner may lead to a change in the profit sharing ratio among the existing partners.
- This can sometimes cause dissatisfaction among the existing partners if they feel that the new partner's share is disproportionate to their contribution.

Revaluation of Assets and Liabilities
- The admission of a new partner often requires the revaluation of the firm's assets and liabilities.
- This process can be time-consuming and complex, as it involves determining the fair value of all the assets and liabilities of the firm.

Adjustment of Goodwill
- The admission of a new partner may also necessitate the adjustment of goodwill.
- This can be a contentious issue, as the existing partners may have differing opinions on the value of goodwill and how it should be distributed among them.

Capital Contribution
- The new partner will be required to make a capital contribution to the firm.
- This can be a significant financial burden for the new partner, especially if the firm requires a large capital investment.

Change in Decision-Making
- The admission of a new partner can lead to a shift in decision-making within the firm.
- This can sometimes create conflicts among the partners if they have different opinions on how the business should be run.

In conclusion, while admitting a new partner can bring fresh ideas and resources to a partnership firm, it also poses practical problems that need to be carefully managed to ensure the continued success of the business.

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