Partnership

Admission

Medium

common

Arrange in correct sequence at a time of admission of partner-

(A) Adjustments of capital accounts.

(B) Valuation of goodwill

(C) Calculation of new profit sharing ratio and sacrificing ratio.

Choose the correct answer from the options given below:

(A), (B), (C)

(A), (C), (B)

(B), (A), (C)

(C), (B), (A)

(A), (B), (C)

(A), (C), (B)

(B), (A), (C)

(C), (B), (A)

✅ Correct Option: 4

When a new partner is admitted, the procedures must follow a logical sequence:

Step 1: Calculation of New Profit Sharing Ratio and Sacrificing Ratio (C)

Before any adjustments can be made, it's essential to determine how profits will be shared among all partners including the new partner. The new profit sharing ratio establishes each partner's future share. The sacrificing ratio shows how much the old partners are giving up from their existing shares for the new partner.

Sacrificing Ratio = Old Ratio - New Ratio

Step 2: Valuation of Goodwill (B)

Once the sacrificing ratio is known, goodwill is valued and adjusted. The new partner must compensate the old partners for sacrificing their profit share. Goodwill brought in by the new partner is distributed among old partners in their sacrificing ratio.

The sacrificing ratio (calculated in step 1) is necessary to distribute goodwill properly among old partners.

Step 3: Adjustment of Capital Accounts (A)

After all adjustments like goodwill, revaluation of assets and liabilities are complete, the capital accounts are adjusted. Partners may decide to maintain capitals in a specific proportion (usually the new profit sharing ratio) or as per agreement.

This is the final step because it requires all previous adjustments to be completed first to determine the correct capital balances.

The correct sequence is (C), (B), (A) which corresponds to Option 4.

2026: 11 May Shift 1

Amar and Barun are partners, sharing profits in the ratio of 3:1. Charu is admitted into the firm for 1/5 share of profits. Charu brought in Rs. 30,000 in respect of her capital. The capitals of old partners Amar and Barun, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 65,000 and Rs. 15,000 respectively. It is agreed that partners' capitals should be according to the new profit sharing ratio. Calculate the amount brought in/withdrawn by Amar to adjust his capital according to the new profit sharing ratio.

2025: 3 June Shift 2

Which statement among the following is NOT true about Goodwill?

2025: 22 May Shift 1

A and B share profits in the ratio of 3:2. C was admitted as a partner who gets 1/5 share. New profit sharing ratio, if C acquires 3/20 from A and 1/20 from B, would be:

2025: 3 June Shift 1

The capital of the firm is Rs. 1,00,000 and normal rate of return is 8%. If the average profits for last 5 years are Rs. 12,000 then find goodwill of the firm based on 3 years' purchase of super profits.

2023: 28 May Shift 1

What journal entry will be passed for goodwill appearing in the books ?

2022: 16 July Shift 2

Arrange the following steps to calculate value of Goodwill by capitalization method of super profit in a proper sequence.

A. Calculate normal profit on capital employed

B. Actual Profits - Normal Profits = Super Profit

C. $\frac{super\ profit \times 100}{Normal\ rate\ of\ returns}$

D. Calculate actual profits on capital employed

Choose the correct answer from the given options

Solution

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