Read the following facts about the admission of a partner. A) A new p…

Read the following facts about the admission of a partner.

A) A new partner acquires his share from the old partners that reduces the old partners share in profits.
B) The partner's capital must be adjusted so as to be proportionate to their new profit sharing ratio.
C) Assets and Liabilities may be revalued and reassessed on admission of a partner.
D) Adjustment for Reserves and Accumulated profits/loss is done.
E) Profit sharing ratio of existing partners may change on admission of a new partner.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → A, C, D and E only

Admission of a partner changes the ratio and calls for adjustments; adjusting capitals is done only if the partners agree:

(A) A new partner acquires his share from the old partners that reduces the old partners share in profits. — True. The old partners sacrifice part of their share.
(B) The partner’s capital must be adjusted so as to be proportionate to their new profit sharing ratio. — False. Capitals are adjusted only when the partners so agree; it is not compulsory.
(C) Assets and Liabilities may be revalued and reassessed on admission of a partner. — True. They are brought to current values through a Revaluation Account.
(D) Adjustment for Reserves and Accumulated profits/loss is done. — True. They belong to the old partners and are shared in the old ratio.
(E) Profit sharing ratio of existing partners may change on admission of a new partner. — True. Their ratio changes according to what each gives up.

NCERT (2026-27 edition):
New Profit Sharing Ratio – “When new partner is admitted he acquires his share in profits from the old partners. In other words, on the admission of a new partner, the old partners sacrifice a share of their profit in favour of the new partner.”

NCERT (2026-27 edition):
Adjustment of Capitals – “Sometimes, at the time of admission, the partners agree that their capitals should also be adjusted so as to be proportionate to their profit sharing ratio.”

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “At the time of admission of a new partner, it is always desirable to ascertain whether the assets of the firm are shown in books at their current values. In case the assets are overstated or understated, these are revalued.”

NCERT (2026-27 edition):
Adjustment for Accumulated Profits and Losses – “Sometimes a firm may have accumulated profits not yet transferred to capital accounts of the partners. These are usually in the form of general reserve, reserve and/or Profit and Loss Account. The new partner is not entitled to have any share in such accumulated profits. These are distributed among the partners by transferring it to their capital current accounts in old profit sharing ratio.”

NCERT (2026-27 edition):
New Profit Sharing Ratio – “… In any case, on admission of a new partner, the profit sharing ratio among the old partners will change keeping in view their respective contribution to the profit sharing ratio of the incoming partner.”