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What adjustments are mainly done at the time of admission of a new partner?
(i) Adjustment in Profit sharing ratio
(ii) Goodwill
(iii) Accumulated profits, Reserves and losses
(i) Adjustment in Profit sharing ratio
(ii) Goodwill
(iii) Accumulated profits, Reserves and losses
- a)Only (i) and (ii)
- b)Only (i)
- c)All (i), (ii) and (iii)
- d)Only (ii)
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
What adjustments are mainly done at the time of admission of a new par...
Adjustments to be done at the time of admission of a partner are:
1.Change in profit sharing ratio
2.Adjustment for premium for goodwill
3.Adjustment of old goodwill (given in balance sheet)
4.Revaluation account (revaluation of assets and re-assessment of liabilities)
5.Accumulated profits and reserves
6.Adjustment of capital
1.Change in profit sharing ratio
2.Adjustment for premium for goodwill
3.Adjustment of old goodwill (given in balance sheet)
4.Revaluation account (revaluation of assets and re-assessment of liabilities)
5.Accumulated profits and reserves
6.Adjustment of capital
Most Upvoted Answer
What adjustments are mainly done at the time of admission of a new par...
Adjustments at the Time of Admission of a New Partner
(i) Adjustment in Profit Sharing Ratio
When a new partner is admitted into a partnership firm, the existing partners may decide to change the profit sharing ratio. The profit sharing ratio determines how the profits and losses of the firm will be divided among the partners. The adjustment in profit sharing ratio is necessary to accommodate the new partner's share in the profits and losses of the firm. This adjustment is made to ensure equity and fairness among all partners.
(ii) Goodwill
Goodwill is an intangible asset that represents the reputation, brand value, and customer loyalty of a partnership firm. When a new partner is admitted, the value of the firm's goodwill may change. The existing partners may decide to revalue the goodwill and make necessary adjustments. The new partner may bring in additional capital or skills that enhance the firm's goodwill, or the existing partners may have to compensate the new partner for their share in the goodwill.
(iii) Accumulated Profits, Reserves, and Losses
The accumulated profits, reserves, and losses of a partnership firm need to be adjusted at the time of admission of a new partner. The new partner should be entitled to their share of the accumulated profits and reserves, if any. Similarly, the new partner may also need to bear their share of the accumulated losses, if any. These adjustments ensure that the new partner's financial position in the firm is accurately reflected.
Conclusion
At the time of admission of a new partner, adjustments are made in the profit sharing ratio, goodwill, and accumulated profits, reserves, and losses. These adjustments are necessary to maintain fairness and equity among all partners and to accurately reflect the financial position of the partnership firm.
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What adjustments are mainly done at the time of admission of a new partner?(i) Adjustment in Profit sharing ratio(ii) Goodwill(iii) Accumulated profits, Reserves and lossesa)Only (i) and (ii)b)Only (i)c)All (i), (ii) and (iii)d)Only (ii)Correct answer is option 'C'. Can you explain this answer?
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