Accountancy Part AAdmission of a Partner

Arrange the sequence of following important adjustments which require…

Arrange the sequence of following important adjustments which require attention at the time of admission of a new partner.

(A) Valuation and adjustment of goodwill

(B) Balance sheet of Reconstituted firm

(D) New profit sharing ratio and Sacrificing ratio

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (D), (A), (C), (B)

On the admission of a partner the adjustments are taken up in the order in which each one needs the result of the one before it.

(D) New profit sharing ratio and Sacrificing ratio — first, because the new partner’s share and the old partners’ sacrifice decide how the goodwill is shared.

(A) Valuation and adjustment of goodwill — next, since the premium for goodwill is credited to the old partners in their sacrificing ratio.

(C) Adjustment of partners’ capital — after goodwill, revaluation and reserves have been settled, because it works on the balances left in the capital accounts.

(B) Balance sheet of Reconstituted firm — last, as it shows the result of all the adjustments.

NCERT (2026-27 edition):
Admission of a New Partner – “… Following are the other important points which require attention at the time of admission of a new partner: 1. New profit sharing ratio; 2. Sacrificing ratio; 3. Valuation and adjustment of goodwill; 4. Revaluation of assets and Reassessment of liabilities; 5. Distribution of accumulated profits (reserves); and 6. Adjustment of partners’ capitals.”