In admission of a partner, arrange the following in a sequence for ad…

In admission of a partner, arrange the following in a sequence for adjustment of capital:

(A) Calculate required capitals of old partners

(B) Calculate firm's new capital

(D) Find out the cash to be brought in or withdrawn by old partners after all adjustments

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (C), (B), (A), (D)

When capitals are to be made proportionate to the new profit sharing ratio, the new partner’s capital is used as the base for the whole firm. Each step uses the result of the one before.

(C) Calculate new profit sharing ratio — every later figure is a share of the firm’s capital, so the new shares are needed first.

(B) Calculate firm's new capital — the new partner’s capital divided by his share gives the total capital of the new firm.

(A) Calculate required capitals of old partners — the total capital multiplied by each old partner’s new share gives what his capital should be.

(D) Find out the cash to be brought in or withdrawn by old partners after all adjustments — each required capital is compared with his present adjusted capital; a shortage is brought in and a surplus is withdrawn.

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.”