Accounting for Partnership Firm – Admission of a Partner

Partnership Firm is any type of business under which two or more businessmen join together to start a business with predetermined profit or loss sharing ratio. All the terms of partnership are mentioned in partnership deed.

Sometime partnership firm gets restructured due to admission of a partner.

New Partner may be admitted to the partnership firm for the benefit of the business this is may be because of multiple skills that person is having so that existing business can flourish.

Due to admission of a new partner existing partners need to sacrifice their existing profit sharing ratio and give that to new partner. Also due to admission of a partner new profit sharing ratio need to determine.

Generally new partner introduces some capital and give amount towards goodwill original partners have bought to the partnership firm.

When new partner is admitted some of the existing assets and liabilities need to revalue. We will learn its treatment in accounts in this series.

Also we will learn how to prepare final accounts i.e. profit and loss account, balance sheet and partners capital account and how balance sheet of partnership firm always tallies.

Journal entries related to final accounts with unique technique to create journal entries are also explained in this series.