Sometimes, at the time of admission, the old partners agree that thei…

Sometimes, at the time of admission, the old partners agree that their capital should also be adjusted to be proportionate to their profit sharing ratio on the basis of the new partner's capital. Identify the correct sequence to be followed:

A. Ascertain the total capital of the firm on the basis of the new partner's capital.
B. Compare old partners' capital with adjusted capital of old partners.
C. Ascertain capital of old partners after all adjustments like interest on capital, salary, etc.
D. Ascertain deficiency or surplus capital of partners.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

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

When the new partner’s capital is made the base, the old partners’ capitals are worked out from it and then set against what they actually have.

A. Ascertain the total capital of the firm on the basis of the new partner’s capital. — the new partner’s capital and his share fix the total capital, and each old partner’s new capital follows from the new ratio.

C. Ascertain capital of old partners after all adjustments like interest on capital, salary, etc. — this gives what each old partner actually has once goodwill, reserves and revaluation are posted.

B. Compare old partners’ capital with adjusted capital of old partners. — the two figures from the steps above are set side by side.

D. Ascertain deficiency or surplus capital of partners. — the comparison shows who falls short and must bring in cash, and who has a surplus to withdraw.

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.”