Admission of a Partner – Adjustments Required

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

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