CBSE Sample Papers

CBSE Sample Papers from CBSEtuts.com

Partnership Accounting – Accounting Problems On Partners Retirement

by Leave a Comment

Accounting Problems 

The accounting problems in the event of retirement of a partner can be put as follows:

(i) Adjustment for Goodwill,

(ii) Revaluation of assets  and liabilities.

(iii) Adjustment regarding Reserves and other undistributed profits.

(iv) Adjustments regarding profit sharing ratios.

(v) Payment to the retiring partner.

1. Goodwill. The retiring partner will be entitled to his share of goodwill in the (inn. The problem of goodwill can be dealt in the following two different ways:

(a) Where goodwill account is already appearing in the books:

In such a case if goodwill is properly valued, no further adjustment will be needed. The amount has already been credited to all the partners including the retiring partner.

(b) Where goodwill account is not appearing in lire book.  [Read more…]

Partnership Accounting – Accounting Problems on Admission of a New Partner

by Leave a Comment

ACCOUNTING PROBLEMS

The accounting problems on admission of a new partner can be put as follows:

(i) Adjustment in the profit sharing ratio.

(ii) Adjustment for goodwill.

(iii) Adjustment for revaluation of assets and liabilities.

(iv) Adjustment for reserves and other accumulated profits.

(v) Adjustment for capital.

Each of the above problems are being discussed in the following pages.

Adjustment in the Profit Sharing Ratio

A newly admitted partner will be entitled to share the profits or bear the losses with the other partners. Hence the profit sharing ratio of the partners will change. There can be two situations.

The new partner may be given a certain proportion of the total profit or required to bear a certain proportion of the total loss and the old partners continue to share the balance of profit or bear the balance of loss in the old ratio in between themselves.

Partnership Accounting – Admission of Partner

by Leave a Comment

ADMISSION OF PARTNER 

Section 31 of the Partnership Act deals with the statutory provision regarding admission of a new partner. These provisions are summarised below:

(a) A new partner cannot be admitted without the consent of all the partners unless otherwise agreed upon.

(b) A new partner admitted to an existing firm, is not liable to any debts of the firm incurred, before he conies in as a partner. The new partner cannot be held responsible for the acts of the old partners unless it is proved that

(i) the reconstituted firm has assumed the liability to pay the debt; and

(ii) that the creditor concerned has agreed to accept the reconstituted finn as his debtor and to discharge the old firm from liability.

However, a minor adMitted to the benefits of partnership, who, if he elects to become partner in the firm after attaining majority, shall become personally liable for all the acts of the finn done since he was admitted to the benefits of partnership.

A newly admitted partner shall be liable only for the debts incurred or transactions entered into by the fimi subsequent to his becoming a partner.