Five types of adjustments are required on the admission of a new partner in a partnership firm
- Determine new profit sharing ratio, Sacrificing ratio and gaining ratio
- Do the valuation of Goodwill and pass the necessary accounting entries
- Revaluation of assets and reassessment of liabilities
- Adjustments for Reserves, Accumulated Profits and Accumulated Losses
- Capital Adjustment
The above five types of adjustments are common for every type of reconstitution of partnership firm which includes:
- Change in Profit sharing ratio among partners
- Admission of a new partner
- Retirement of one or more partners
- Death of a partner
- Amalgamation of two or more partnership firms
Thus the above said 5 types of adjustments will be done in each case of reconstitution of partnership firm