Partnership

Admission

Medium

A and B are partners sharing profits in the ratio of 2:1. C is admitted into the firm for 1/4 share of profits. C brings in Rs. 20,000 in respect of his capital. The capitals of old partners A and B, after all adjustments relating to goodwill, revaluation of assets and liabilities, etc., are Rs. 45,000 and Rs. 15,000 respectively. It is agreed that partners' capitals should be according to the new profit sharing ratio. Determine the new profit sharing ratio

6:3:2

2:1:1

2:1:2

1:2:1

✅ Correct Option: 2

C is admitted for $\frac{1}{4}$ share of profits.

Remaining share for old partners A and B = $1 - \frac{1}{4} = \frac{3}{4}$

This remaining $\frac{3}{4}$ share will be divided between A and B in their old ratio of 2:1.

A's new share = $\frac{3}{4} \times \frac{2}{3} = \frac{2}{4} = \frac{1}{2}$

B's new share = $\frac{3}{4} \times \frac{1}{3} = \frac{1}{4}$

C's share = $\frac{1}{4}$

New Profit Sharing Ratio = $\frac{1}{2} : \frac{1}{4} : \frac{1}{4}$

Converting to simple ratio by multiplying by 4:

A : B : C = 2 : 1 : 1

The capitals of partners (Rs. 45,000, Rs. 15,000, and Rs. 20,000) mentioned in the question are their adjusted capitals which will now need to be brought in proportion to this new profit sharing ratio of 2:1:1 through further capital adjustments.

2026: 13 May Shift 1

Which of the following statements are correct?

(A) When a new partner is admitted into partnership firm, sacrificing ratio is used to distribute new partner's share of goodwill.

(B) Hidden goodwill is the excess of Total Capital of the new firm (based on new partner's capital) over the actual combined capital of all the partners.

(C) When a new partner is admitted into partnership firm, the new partner compensates the old partners for their loss of share in the divisible profits of the firm for which he brings in an additional amount that is called as Premium for Goodwill.

(D) Employees' Provident Fund should be distributed among the old partners at the time of admission of a new partner.

Choose the correct answer from the options given below:

2026: 6 June Shift 1

At the time of admission, if goodwill was raised but not written off then its impact will be:

2023: 20 June Shift 2

Profits made on Revaluation of Assets and Reassessment of Liabilities is distributed among whom?

2022: 15 July Shift 2

P, Q and R are partners sharing profits in the ratio of 3:1:1 S admits in the firm for $\frac{2}{10}$ share in the future. The sacrificing ratio would be

2026: 29 May Shift 1

Arun and Anuj are partners sharing profits in the ratio of 2:1. Varun was admitted for 1/4 share, half of which was given by Arun and the remaining was contributed by Anuj. Goodwill of the firm is valued at Rs. 40,000. How much of the goodwill will be credited to old partners' capital account?

2022: 20 Aug Shift 2

Calculate the amount of adjusted profit for the year ended 31 March 2021 for the purpose of valuation of Goodwill from the following information:

Profit for the year ended 31 March 2021: Rs. 80,000

On 1 July, 2020, a major plant repair was undertaken for Rs. 10,000 which was charged to Revenue. The said sum is to be capitalised for Goodwill valuation subject to adjustment of depreciation @ 10 % p.a. on reducing balance method.

Solution

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