Unit 3: Admission of a New Partner (Summary) CA CPT Notes | EduRev

Principles and Practice of Accounting

CA CPT : Unit 3: Admission of a New Partner (Summary) CA CPT Notes | EduRev

The document Unit 3: Admission of a New Partner (Summary) CA CPT Notes | EduRev is a part of the CA CPT Course Principles and Practice of Accounting.
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(Summary)

  • New partners are admitted for the benefit of the partnership firm. New partner is admitted either for increasing the partnership capital or for strengthening the management of the firm.
  • When a new partner is admitted into the partnership, assets are revalued and liabilities are reassessed. A Revaluation Account (or Profit and Loss Adjustment Account) is opened for the purpose. This account is debited with all reduction in the value of assets and increase in liabilities and credited with increase in the value of assets and decrease in the value of liabilities. The dierence in two sides of the account will show profit or loss. This is transferred to the Capital Accounts of old partners in the old profit sharing ratio.
  • Whenever a new partner is admitted, any reserve etc. lying in the Balance Sheet should be transferred to the Capital Accounts of the old partners in the old profit sharing ratio.


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