Arrange the following accounting treatment steps in order/sequence in case of admission of a partner in a firm.
A. Adjustment of the partner's capital account balance.
B. Transfer of revaluation profit to capital account of partners.
C. Calculation of New Profit Ratio & Gaining Ratio.
D. Transfer of premium of goodwill to old partner's capital account.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
Correct answer: Option (4) → C, D, B, A
Concept: On admission, the new/sacrificing ratio is computed first, then goodwill and revaluation results are recorded, and capital accounts are adjusted last – per Reconstitution of a Partnership Firm – Admission of a Partner.
Correct order: (C) Calculate New Profit Ratio & Gaining/Sacrificing Ratio → (D) Transfer premium for goodwill to old partners’ capital accounts → (B) Transfer revaluation profit to partners’ capital accounts → (A) Adjust the partners’ capital account balances. Hence C, D, B, A.