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As per the 'Indian partner Act 1932', a person may be admitted as partner in the firm either with consent of all existing partner or in an accordance with the contract already made between the existing partners in the firm for the admission of new partners in the business concern.
1. Calculate the new profit sharing ration and sacrificing ratio.
2. Reevaluate the liabilities and assets.
3. Accumulation of profit or losses, resources distribution.
4. Calculation of goodwill.
5. Partners' capital A/c adjustments.
Kapil and Krish are running a partnership firm dealing in toys. They are
one of the most successful businessmen in the locality. They now decide to
start manufacturing toys that are electronically operated to diversify their
business. For this they need more capital and also technical expertise. Mohit;
their friend is an electronic engineer and has capital also. They have
persuaded him to join their firm. In case, he joins the partnership firm, this
will be a case of admission of a partner. As a result, he may need to bring in
capital and share of goodwill. In this lesson, you will learn about goodwill
and other adjustments at the time of admission of a partner. Mohit will bring
in capital and share of goodwill. Some changes in the value of some assets and
liabilities of the existing firm are need to bring them at their realistic
value, on his admission. There may be other issues involving finance on his
admission. All this need accounting treatment.
