Arrange the following steps in correct order for calculation of Propo…

Arrange the following steps in correct order for calculation of Proportionate Capital of New Partner.

(A) Balancing the capital account of old partners
(B) Calculation of Gain/Loss on Revaluation and transferring to Capital Account
(C) Transferring Accumulated Profit to Capital account
(D) Calculation of Proportionate Capital for New Partner
(E) Adjustment for Goodwill in Partner's capital account

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B), (E), (C), (A), (D)

The new partner’s capital is fixed in proportion to the old partners’ capitals after all adjustments. So every adjustment is made first, the old capitals are balanced, and only then is the new partner’s share worked out.

(B) Calculation of Gain/Loss on Revaluation and transferring to Capital Account — first. Assets and liabilities are revalued and the gain or loss is carried to the old partners’ capitals in the old ratio.

(E) Adjustment for Goodwill in Partner’s capital account — second. The sacrificing partners are credited with their share of goodwill.

(C) Transferring Accumulated Profit to Capital account — third. Reserves and undistributed profits go to the old partners in the old ratio.

(A) Balancing the capital account of old partners — fourth. The balances now show the old partners’ adjusted capitals.

(D) Calculation of Proportionate Capital for New Partner — last. Combined adjusted capital of the old partners ÷ their combined share × the new partner’s share.

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. In such a situation, if the capital of the new partner is given, the same can be used as a base for calculating the new capitals of the old partners. The capitals thus ascertained should be compared with their old capitals after all adjustments relating to goodwill reserves and revaluation of assets and liabilities, etc. have been made; and then the partner whose capital falls short, will bring in the necessary amount to cover the shortage and the partner who has a surplus, will withdraw the excess amount of capital.”