Arrange the following regarding admission procedure in the correct sequence.

(A) Giving share to the new partner.

(B) Treatment of Goodwill

(C) Calculating new profit sharing ratio & sacrificing ratio

(D) Preparation of Revaluation A/c

(E) Preparing Partner's Capital A/c and Balance Sheet

Choose the correct answer from the options given below:

(A), (C), (B), (D), (E)

The correct answer is option 2- (A), (C), (B), (D), (E).

(A) Giving share to the new partner- The new partner is admitted, and their capital account is credited with their capital contribution and Share of goodwill (if any). The partnership is now reconstituted with a new agreement, profit-sharing ratio.

(C) Calculating new profit sharing ratio & sacrificing ratio-  The existing partners decide how the profits will be shared in the future. The sacrificing ratio is calculated to determine how much profit the old partners are giving up for the new partner. The ratio in which the old partners agree to sacrifice their share of profit in favour of the incoming partner is called sacrificing ratio. 

(B) Treatment of Goodwill- Based on the sacrificing ratio, the new partner compensates old partners for goodwill (i.e., their past efforts and reputation). The new partner is required to compensate the old partner’s for their loss of share in the super profits of the firm for which he brings in an additional amount as premium for goodwill. This amount is shared by the existing partners in the ratio in which they forgo their shares in favour of the new partner which is called sacrificing ratio.

(D) Preparation of Revaluation A/c- 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. Similarly, a reassessment of the liabilities is also done so that these are brought in the books at their correct values. At times there may also be some unrecorded assets and liabilities of the firm. These also have to be brought into the books of the firm. For this purpose the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit sharing ratio.

(E) Preparing Partner's Capital A/c and Balance Sheet- After goodwill and revaluation adjustments, all partners' capital accounts are updated. Capital Adjustments include Revaluation profit/loss, Goodwill adjustments, Cash/capital brought in by the new partner. Then, the new balance sheet of the reconstituted firm is prepared reflecting New capital structure, Revised asset/liability values, Cash brought in by new partner.