Take a breath. Admission of a Partner looks frightening the first time you see it — a page full of adjustments, three or four ledger accounts, and a Balance Sheet that has to tie to the last rupee. But here is the honest truth: this chapter is not hard, it is just long. Every question is the same six steps in the same order, every single time. Once those six steps become muscle memory, you will finish a six-mark admission question faster than most people finish a three-mark theory answer. And it is worth the effort: Accounting for Partnership Firms carries 36 of the 80 theory marks in Class 12 Accountancy, and admission is usually the single biggest numerical on the paper — typically a 6-mark full question, often with a 3-mark or 4-mark sub-question sitting beside it. Let us walk through it together, slowly, from zero.
- What Admission Really Changes — And the Six-Step Routine
- Calculating the New Profit-Sharing Ratio
- Sacrificing Ratio (And the Odd Case of a Gaining Partner)
- Goodwill on Admission and the AS 26 Rule
- Premium for Goodwill Brought in Cash
- Premium Brought in Kind, and Premium Withdrawn
- When Goodwill Is Not Brought In, or Only Partly
- Hidden Goodwill
- Revaluation of Assets and Reassessment of Liabilities
- Accumulated Profits, Reserves and Losses
- Adjustment of Partners’ Capitals
- Partners’ Capital Accounts and the New Balance Sheet
- Changes in the Partnership Deed on Admission
- A Full Board-Style Question, Start to Finish
- Practice Worksheet
Your Game Plan
- Spend one full sitting on ratios alone — new ratio and sacrificing ratio. Do not touch goodwill until fractions feel easy.
- Then learn goodwill in four separate flavours: brought in cash, brought in kind, not brought in, and hidden. Learn them one at a time.
- Then Revaluation Account on its own. Then reserves on their own. Both are short and mechanical.
- Then capital adjustment — the step most students skip and then lose 2 marks on.
- Only now attempt a full question. Give yourself 20 minutes, then 15, then 12.
- Finish with the worksheet at the bottom. Check the Balance Sheet totals every single time; if they do not tie, hunt the error before you look at the answer.
What Admission Really Changes — And the Six-Step Routine
Think of a partnership firm as a shared flat. Two friends have been splitting the rent, the bills and the leftover pizza in a fixed proportion for years. Now a third friend wants to move in. Nothing about the flat itself has changed — same walls, same furniture — but almost every arrangement has to be re-negotiated. Who gets how much space? What does the new person pay for the fact that the flat is already set up, already has a reputation with the landlord, already has working wi-fi? Are the old shared savings in the tin box the property of the original two, or of all three?
That re-negotiation is exactly what accountants call reconstitution. The firm carries on — it is not dissolved — but the old agreement ends and a new one begins. Admission of a partner is one of four ways a firm gets reconstituted (the others are a change in ratio among existing partners, retirement, and death).
Every single adjustment on admission answers one question: “Does this rupee belong to the old partners alone, or to the new firm?” Anything earned, saved or lost before the new partner walked in belongs only to the old partners. So it must be settled and cleared out of the books first, in the old ratio. That is the whole logic. Goodwill, reserves, revaluation gains — all of them are just “old business” being handed to the old partners before the doors open on the new firm.
Section 31 of the Indian Partnership Act, 1932 says a person can be admitted as a partner only with the consent of all existing partners, unless the deed says otherwise. On admission, the incoming partner gets two rights — the right to share in future profits, and the right to share in the assets of the firm.
And here is the routine. Six steps. Learn the order, not just the steps — the order is what keeps your Balance Sheet honest.
| Step | What you do | Which ratio you use |
|---|---|---|
| 1 | Work out the new profit-sharing ratio | — |
| 2 | Work out the sacrificing ratio | Old share minus new share |
| 3 | Treat goodwill (premium) | Sacrificing ratio |
| 4 | Revalue assets, reassess liabilities | Old ratio |
| 5 | Distribute accumulated profits, reserves, losses | Old ratio |
| 6 | Adjust capitals, then draw the new Balance Sheet | New ratio |
Goodwill uses the sacrificing ratio. Revaluation and reserves use the old ratio. Future profits and capital adjustment use the new ratio. Write these three lines at the top of your rough column before you start any admission question. It takes eight seconds and it prevents the most expensive mistake in this chapter.
Calculating the New Profit-Sharing Ratio
The new profit-sharing ratio is simply the proportion in which all the partners — old and new — will divide profits from the day of admission onward. Picture a chapati. Before admission, two people share the whole chapati. After admission, the new partner takes a piece off it, and the old partners keep what is left. The total is still one chapati. That is the only rule you can never break: all the shares must add up to 1.
Questions give you the information in one of four ways. Learn to recognise which one you are looking at — that recognition is 80% of the work.
| The question says… | What you do |
|---|---|
| Nothing about how old partners will share (or “they will continue to share in their old ratio”) | Give the new partner his share; split the remainder in the old ratio |
| The new partner acquires stated fractions from named partners | Subtract each stated fraction from that partner’s old share |
| Old partners “surrender” a fraction of their own share | Sacrifice = fraction × that partner’s own old share |
| The new ratio of everyone is stated outright | Nothing to calculate — go straight to sacrificing ratio |
Chirag takes 1/5. What is left for Anita and Bharat is 1 − 1/5 = 4/5, and they divide that 4/5 in their old ratio 3 : 2.
Anita = 3/5 × 4/5 = 12/25
Bharat = 2/5 × 4/5 = 8/25
Chirag = 1/5 = 5/25
Check: 12/25 + 8/25 + 5/25 = 25/25 = 1. ✔
New ratio = 12 : 8 : 5.
First, a sanity check on the question itself: 3/16 + 1/16 = 4/16 = 1/4. ✔ The pieces she buys do add up to the share she is promised.
Asha = 5/8 − 3/16 = 10/16 − 3/16 = 7/16
Bilal = 3/8 − 1/16 = 6/16 − 1/16 = 5/16
Chandni = 4/16
Check: 7 + 5 + 4 = 16. ✔
New ratio = 7 : 5 : 4. Notice how the shares she bought (3/16 and 1/16) are exactly the sacrifices — sacrificing ratio 3 : 1.
The words “of his share” are doing all the work here. Amit is not giving up 1/4 of the firm — he is giving up a quarter of his own 3/5.
Amit sacrifices = 1/4 × 3/5 = 3/20 = 15/100
Basanti sacrifices = 1/5 × 2/5 = 2/25 = 8/100
Chetan’s share = 15/100 + 8/100 = 23/100
Amit = 3/5 − 3/20 = 60/100 − 15/100 = 45/100
Basanti = 2/5 − 2/25 = 40/100 − 8/100 = 32/100
Check: 45 + 32 + 23 = 100. ✔
New ratio = 45 : 32 : 23, sacrificing ratio = 15 : 8.
These are completely different. “Chetan gets 1/4 share” means 1/4 of the whole firm. “Amit surrenders 1/4 of his share” means 1/4 × Amit’s own fraction. Students who miss the words “of his share” get every subsequent number wrong — ratio, goodwill, capital adjustment, all of it. Underline those four words in the question paper.
Why it works: a profit-sharing ratio is nothing but a set of fractions of the same whole. Whenever you are unsure, convert everything to a common denominator and check that the numerators add up to that denominator. If they do not, you have made an arithmetic slip — go back before you write a single journal entry, because every later figure depends on this.
Sacrificing Ratio (And the Odd Case of a Gaining Partner)
The new partner’s share has to come from somewhere. It comes out of the old partners’ pockets. The amount each old partner gives up is called the sacrifice, and the proportion in which they give up is the sacrificing ratio.
Sacrificing Share = Old Share − New Share
If the answer is positive, that partner has sacrificed and will be credited with goodwill. If the answer is negative, that partner has actually gained and will be debited. The total sacrifice (net of any gain) always equals the new partner’s share.
Why does this matter so much? Because the premium the new partner pays for goodwill is compensation. It is compensation to the people who gave something up. So the money must be shared out in exactly the proportion in which the giving-up happened — not in the old ratio, not in the new ratio, but in the sacrificing ratio. In many easy questions the sacrificing ratio happens to be identical to the old ratio (as in Example 1), and that coincidence lulls students into thinking the rule is “old ratio”. It is not.
First confirm Divya really gets 1/5: total parts = 5 + 4 + 3 + 3 = 15, so Divya = 3/15 = 1/5. ✔
Now put old and new shares on a common denominator. Old shares are in ninths, new shares in fifteenths — LCM is 45.
Aarav: old 4/9 = 20/45, new 5/15 = 15/45 → sacrifice 5/45
Bela: old 3/9 = 15/45, new 4/15 = 12/45 → sacrifice 3/45
Chirag: old 2/9 = 10/45, new 3/15 = 9/45 → sacrifice 1/45
Total sacrifice = 9/45 = 1/5 = Divya’s share. ✔ That cross-check is free and it catches almost every slip.
Sacrificing ratio = 5 : 3 : 1.
Total parts = 13 + 2 + 5 = 20, so Chetna gets 5/20 = 1/4. ✔
Arun: old 3/5 = 12/20, new 13/20 → 12/20 − 13/20 = −1/20, a GAIN of 1/20
Bhavna: old 2/5 = 8/20, new 2/20 → sacrifice 6/20
Net: 6/20 − 1/20 = 5/20 = 1/4 = Chetna’s share. ✔ Arun has quietly bought a slice from Bhavna too, so Arun must pay for it.
Chetna’s share of goodwill = 1/4 × 2,00,000 = ₹50,000
Arun’s gain = 1/20 × 2,00,000 = ₹10,000 (he must pay this)
Bhavna’s total credit = 6/20 × 2,00,000 = ₹60,000
Check: 50,000 + 10,000 = 60,000. ✔
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Premium for Goodwill A/c Dr. Arun’s Capital A/c Dr. To Bhavna’s Capital A/c (Goodwill credited to the sacrificing partner; gaining partner debited) | 50,000 10,000 | 60,000 |
After computing sacrifices, add them up. The total must equal the incoming partner’s share exactly. If it does not, either your new ratio is wrong or your arithmetic is. Thirty seconds of checking here saves five marks later, because goodwill, capital accounts and the Balance Sheet all sit on top of this number.
Why it works: the firm’s future profit is a fixed cake. If the new partner takes a slice, the sum of what the old partners lose must equal exactly that slice. An old partner whose new share is bigger than his old share has not lost anything — he has bought something extra, so accounting makes him pay, just like the incoming partner does.
Goodwill on Admission and the AS 26 Rule
Suppose your neighbourhood has two identical sweet shops. Same size, same equipment, same rent. One has been there thirty years and has a queue outside every Diwali; the other opened last month. If you were buying, you would happily pay more for the first one — and that extra amount you would pay, over and above the value of the physical stuff, is goodwill. It is the value of reputation, of regular customers, of a name people trust.
When a new partner joins an established firm, he immediately starts earning from a reputation he did nothing to build. So he compensates the old partners for it. That compensation is called premium for goodwill. If the idea of valuing goodwill still feels shaky, revise Goodwill and Change in Profit-Sharing Ratio first — admission simply reuses the same valuation methods.
Under Accounting Standard 26 (Intangible Assets), goodwill can be recorded in the books only when it is purchased — that is, only when money was actually paid for it. Self-generated goodwill is never brought into the books. So on admission you must never pass “Goodwill A/c Dr. To Old Partners’ Capital A/cs”. The premium goes straight to the sacrificing partners’ capital accounts, and no Goodwill asset appears on the new Balance Sheet.
There is one consequence students often forget. If the old Balance Sheet already shows a Goodwill account on its assets side (recorded in some earlier year, perhaps wrongly) — do not confuse this old asset with the premium the new partner brings; they are two different things, it must be wiped out first, among the old partners, in their old ratio, before any admission adjustment happens:
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (a) | Old Partners’ Capital A/cs Dr. (in old ratio) To Goodwill A/c (Existing goodwill written off as required by AS 26) | … | … |
After that, there are exactly four situations you can meet in an exam. Nothing else exists. Here they are side by side, and the next four sections take them one at a time.
| Situation | Core treatment |
|---|---|
| Premium brought in cash | Bank Dr., then Premium for Goodwill A/c distributed in sacrificing ratio |
| Premium brought in kind (asset) | Debit the asset instead of Bank; rest is identical |
| Premium not brought in (or partly) | Debit new partner’s Current A/c for the unpaid part |
| Goodwill not given at all (hidden) | Derive it from the capitals, then debit new partner’s Capital A/c |
Premium for Goodwill Brought in Cash
This is the friendliest version and it appears constantly. The new partner hands over two separate sums: his capital, and his premium for goodwill. Two sums, but usually one cheque — so the entry has one debit and two credits.
Sacrificing ratio: since the old partners keep their mutual ratio, sacrifice is in the old ratio 3 : 2.
Amrita = 40,000 × 3/5 = ₹24,000 Bikram = 40,000 × 2/5 = ₹16,000 (24,000 + 16,000 = 40,000 ✔)
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Bank A/c Dr. To Chaya’s Capital A/c To Premium for Goodwill A/c (Capital and premium brought in by Chaya) | 1,60,000 | 1,20,000 40,000 | |
| (ii) | Premium for Goodwill A/c Dr. To Amrita’s Capital A/c To Bikram’s Capital A/c (Premium distributed in sacrificing ratio 3 : 2) | 40,000 | 24,000 16,000 |
Premium Brought in Kind, and Premium Withdrawn
Sometimes the incoming partner does not have the whole amount in cash. He brings furniture, stock, a delivery van, machinery. Do not panic — nothing changes except the name of the account you debit. Money in, or goods in, it is still value coming into the firm.
The second twist in this section is withdrawal. The old partners may choose to take the premium home instead of leaving it in the firm. That is entirely their right — the premium is their personal compensation. When they withdraw it, their capital accounts are debited and Bank is credited.
Capital check: 2,40,000 + 60,000 = 3,00,000 ✔
Sacrificing ratio = old ratio 2 : 1. Xavier = 90,000 × 2/3 = ₹60,000; Yamini = 90,000 × 1/3 = ₹30,000.
Half withdrawn: Xavier ₹30,000, Yamini ₹15,000, total cash out ₹45,000.
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Bank A/c Dr. Furniture A/c Dr. To Zoya’s Capital A/c (Capital brought in partly in cash and partly in kind) | 2,40,000 60,000 | 3,00,000 | |
| (ii) | Bank A/c Dr. To Premium for Goodwill A/c (Premium for goodwill brought in cash) | 90,000 | 90,000 | |
| (iii) | Premium for Goodwill A/c Dr. To Xavier’s Capital A/c To Yamini’s Capital A/c (Premium credited in sacrificing ratio 2 : 1) | 90,000 | 60,000 30,000 | |
| (iv) | Xavier’s Capital A/c Dr. Yamini’s Capital A/c Dr. To Bank A/c (Half of the premium withdrawn by old partners) | 30,000 15,000 | 45,000 |
Old partners can only withdraw premium that actually came in as cash or bank. If the incoming partner did not bring the premium in cash, there is no cash to withdraw. Read the withdrawal clause carefully: “the old partners withdraw 50% of the premium” always refers to 50% of the amount received.
When Goodwill Is Not Brought In, or Only Partly
Imagine you order chai for the table and your friend says, “I will pay you later.” The chai still happened; the debt is still real. That is exactly what happens when the new partner cannot bring his share of goodwill in cash. The old partners are still entitled to it, so we still credit them — and we record the new partner’s promise by debiting his Current Account.
When the premium is not brought in (fully or partly) but the goodwill figure is given in the question, debit the new partner’s Current A/c, because his agreed capital contribution stays untouched. A debit balance in his Current A/c then appears on the assets side of the new Balance Sheet — it is money the firm is owed.
Chirag’s share of goodwill = 1/5 × 1,50,000 = ₹30,000
Brought in cash = ₹18,000; unpaid = 30,000 − 18,000 = ₹12,000 (debit his Current A/c)
Sacrificing ratio 3 : 2, so the ₹30,000 goes: Anil = 30,000 × 3/5 = ₹18,000; Beena = 30,000 × 2/5 = ₹12,000.
Cross-check: debits 18,000 + 12,000 = 30,000 = credits 18,000 + 12,000. ✔
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Bank A/c Dr. To Premium for Goodwill A/c (Part of premium brought in cash) | 18,000 | 18,000 | |
| (ii) | Premium for Goodwill A/c Dr. Chirag’s Current A/c Dr. To Anil’s Capital A/c To Beena’s Capital A/c (Chirag’s full share of goodwill credited to sacrificing partners 3 : 2) | 18,000 12,000 | 18,000 12,000 |
Hidden Goodwill
This one feels like magic the first time and then becomes obvious. The question never mentions goodwill at all. It just tells you the capitals, and tells you what the new partner brought in. Your job is to notice that he has paid more than his fair share of the firm’s visible capital — and that extra is goodwill hiding in plain sight.
Here is the everyday version. Three friends pool money for a food stall. The stall’s visible worth is ₹9,00,000. A fourth friend wants one quarter of the business and cheerfully pays ₹3,50,000. Why would he pay ₹3,50,000 for a quarter of ₹12,50,000 worth of stall? He would not — unless he believed the business is worth more than its visible assets. That belief has a name: goodwill.
1. Implied total capital of the new firm = New partner’s capital ÷ his share.
2. Actual combined capital = old partners’ capitals after all adjustments (revaluation, reserves, accumulated losses) + new partner’s capital.
3. Hidden goodwill = Step 1 − Step 2. The new partner’s share of it is then debited to his Capital A/c and credited to the sacrificing partners.
Step 2 says “after all adjustments” and it means it. Revaluation profit or loss and the distribution of reserves must be put through the old partners’ capitals before you compare. If you compare with the opening capitals, the hidden goodwill figure will be wrong — and so will everything after it.
Step 1. Ramesh pays ₹3,00,000 for 1/4 share, so on his own valuation the whole firm is worth
₹3,00,000 × 4 = ₹12,00,000
Step 2. Combined capital actually in the firm
= 4,00,000 + 3,00,000 + 3,00,000 = ₹10,00,000
Step 3. Hidden goodwill = 12,00,000 − 10,00,000 = ₹2,00,000
Ramesh’s share of goodwill = 1/4 × 2,00,000 = ₹50,000
Sacrificing ratio 3 : 2 → Prakash ₹30,000, Qadir ₹20,000. (30,000 + 20,000 = 50,000 ✔)
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Ramesh’s Capital A/c Dr. To Prakash’s Capital A/c To Qadir’s Capital A/c (Ramesh’s share of hidden goodwill adjusted in sacrificing ratio 3 : 2) | 50,000 | 30,000 20,000 |
Why it works: a partner who pays for 1/4 of a business is, in effect, telling you what he thinks 4/4 of it is worth. Multiply his cheque by the reciprocal of his share and you have his valuation of the whole firm. Anything above the book capital must be the intangible bit — the reputation the old partners built.
Revaluation of Assets and Reassessment of Liabilities
Book values go stale. A building bought in 2011 sits in the books at cost; the market may have doubled it. Stock may have spoiled. A supplier may have quietly written off a bill. If the new partner walks in while all of that is unrecorded, he would either scoop up gains he never earned or absorb losses he never caused. So before he joins, the firm gives its own books an honest health check. That check is the Revaluation Account, sometimes called the Profit and Loss Adjustment Account.
Revaluation Account is a nominal account, so the ordinary rule applies: losses and expenses on the debit side, gains and incomes on the credit side.
Debit side (losses): assets that fall in value, new or increased provisions, liabilities that rise, unrecorded liabilities now brought in.
Credit side (gains): assets that rise in value, unrecorded assets brought in, liabilities that fall or are written back as no longer payable.
The balancing figure is profit or loss on revaluation, and it goes to the OLD partners in the OLD ratio.
Work each figure out before you write anything:
Land and Building gain = 5,00,000 − 4,20,000 = ₹80,000 (credit)
Stock loss = 80,000 − 72,000 = ₹8,000 (debit)
Furniture = 10% of 1,20,000 = ₹12,000 (debit)
Provision = 5% of 1,60,000 = ₹8,000 (debit)
Creditors written back = ₹6,000 (credit)
Outstanding salary = ₹4,000 (debit)
| REVALUATION ACCOUNT | |||
|---|---|---|---|
| Dr. Particulars | Amount (₹) | Particulars | Amount (₹) Cr. |
| To Stock A/c | 8,000 | By Land and Building A/c | 80,000 |
| To Furniture A/c | 12,000 | By Creditors A/c | 6,000 |
| To Provision for Doubtful Debts A/c | 8,000 | ||
| To Outstanding Salary A/c | 4,000 | ||
| To Profit transferred to: Neha’s Capital A/c 32,400 Omar’s Capital A/c 21,600 | 54,000 | ||
| Total | 86,000 | Total | 86,000 |
If a provision for doubtful debts of ₹10,000 already exists and the new requirement is ₹12,000, only the extra ₹2,000 is a revaluation loss — not ₹12,000. And if the required provision is lower than the existing one, the difference is a revaluation gain. Watch the wording too: if the paper says the provision is to be brought up to 5%, you compare with the existing provision and pass only the difference; if it says a provision is to be created at 5%, you work it out fresh and ignore whatever was there before. In the Balance Sheet, however, always show the full new provision deducted from debtors.
Unlike a “memorandum” revaluation (which you meet only in higher study), the ordinary Revaluation Account you prepare here actually changes the books. So the new Balance Sheet must show Land and Building at ₹5,00,000, Stock at ₹72,000, Furniture at ₹1,08,000, Creditors at ₹84,000, and so on.
Accumulated Profits, Reserves and Losses
Reserves are past profits the partners chose not to withdraw — money left in the tin box from earlier years. Accumulated losses are the opposite. Either way, they were earned or suffered before the new partner arrived, so they belong entirely to the old partners and must be cleared out in the old ratio.
| Item | Where it sits | Treatment on admission |
|---|---|---|
| General Reserve / Reserve Fund | Liabilities side | Credit old partners’ capitals in old ratio |
| Profit and Loss A/c (Cr. balance) | Liabilities side | Credit old partners’ capitals in old ratio |
| Profit and Loss A/c (Dr. balance) | Assets side | Debit old partners’ capitals in old ratio |
| Advertisement Suspense / Deferred Revenue Expenditure | Assets side | Debit old partners’ capitals in old ratio |
| Workmen Compensation Reserve | Liabilities side | Keep back the claim as a liability; distribute only the surplus |
| Investment Fluctuation Reserve | Liabilities side | Absorb the fall in investment value; distribute only the surplus |
The last two deserve a moment. A Workmen Compensation Reserve is money set aside in case workers have to be compensated. If a claim of ₹15,000 has actually arisen, that ₹15,000 is no longer the partners’ money — it is owed to the workers, and it stays on the Balance Sheet as Workmen Compensation Claim. Only what is left over is distributable. If the claim exceeds the reserve, the shortfall is a revaluation loss.
An Investment Fluctuation Reserve works the same way against a fall in the market value of investments. Reduce the investments to market value, absorb the fall out of the reserve, and share only the balance. If the fall is bigger than the reserve, the excess goes to the Revaluation Account as a loss.
General Reserve ₹60,000 → Sudha ₹36,000, Tarun ₹24,000
WCR: ₹15,000 stays as Workmen Compensation Claim; balance ₹25,000 → Sudha ₹15,000, Tarun ₹10,000
IFR: fall = 1,00,000 − 92,000 = ₹8,000, absorbed by the reserve; balance ₹12,000 → Sudha ₹7,200, Tarun ₹4,800
P and L (Dr.) ₹25,000 → debit Sudha ₹15,000, Tarun ₹10,000
Advertisement Suspense ₹15,000 → debit Sudha ₹9,000, Tarun ₹6,000
Net effect:
Sudha = 36,000 + 15,000 + 7,200 − 15,000 − 9,000 = ₹34,200 credit
Tarun = 24,000 + 10,000 + 4,800 − 10,000 − 6,000 = ₹22,800 credit
Cross-check: total distributed = (60,000 + 25,000 + 12,000) − (25,000 + 15,000) = ₹57,000, and 34,200 + 22,800 = 57,000 ✔. Also 34,200 : 22,800 = 3 : 2 ✔
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | General Reserve A/c Dr. To Sudha’s Capital A/c To Tarun’s Capital A/c | 60,000 | 36,000 24,000 | |
| (ii) | Workmen Compensation Reserve A/c Dr. To Workmen Compensation Claim A/c To Sudha’s Capital A/c To Tarun’s Capital A/c | 40,000 | 15,000 15,000 10,000 | |
| (iii) | Investment Fluctuation Reserve A/c Dr. To Investments A/c To Sudha’s Capital A/c To Tarun’s Capital A/c | 20,000 | 8,000 7,200 4,800 | |
| (iv) | Sudha’s Capital A/c Dr. Tarun’s Capital A/c Dr. To Profit and Loss A/c To Advertisement Suspense A/c | 24,000 16,000 | 25,000 15,000 |
Reserves and accumulated profits never enter the Revaluation Account. They go straight from the reserve account to the old partners’ capital accounts. Revaluation Account is only for changes in the values of assets and liabilities.
Adjustment of Partners’ Capitals
Partners often agree that their capitals should sit in the same proportion as their profit shares. It feels fair: if you take 40% of the profit, you should be carrying 40% of the money at risk. This step comes last, after revaluation, reserves and goodwill have all been put through the capital accounts — because only then do you know what each partner actually has.
Exams ask this in exactly two directions. Read the question twice and decide which one you are in.
| Direction | The question says | Method |
|---|---|---|
| A | “The new partner will bring capital proportionate to his share” | Old partners’ adjusted capitals represent their combined share. Scale up to the total, then take the new partner’s fraction. |
| B | “The old partners’ capitals are to be adjusted on the basis of the new partner’s capital” | Total capital = new partner’s capital ÷ his share. Split in the new ratio. Compare with each adjusted capital; the difference is brought in or withdrawn. |
Harish takes 1/5, so Farhan and Gita together keep 1 − 1/5 = 4/5.
Their combined adjusted capital = 3,60,000 + 2,40,000 = ₹6,00,000, and that ₹6,00,000 represents 4/5 of the whole.
Total capital of the new firm = 6,00,000 × 5/4 = ₹7,50,000
Harish’s capital = 1/5 × 7,50,000 = ₹1,50,000
Check: 6,00,000 + 1,50,000 = 7,50,000, and 1,50,000 ÷ 7,50,000 = 1/5 ✔
New ratio. Kabir takes 1/4 out of the old shares in ratio 3 : 1.
Ishaan = 3/4 − (1/4 × 3/4) = 12/16 − 3/16 = 9/16
Jyoti = 1/4 − (1/4 × 1/4) = 4/16 − 1/16 = 3/16
Kabir = 4/16 (9 + 3 + 4 = 16 ✔)
Total capital based on Kabir = 2,00,000 × 4 = ₹8,00,000
Ishaan should have = 8,00,000 × 9/16 = ₹4,50,000 — he has ₹4,80,000, so he withdraws ₹30,000
Jyoti should have = 8,00,000 × 3/16 = ₹1,50,000 — she has ₹1,20,000, so she brings in ₹30,000
Kabir = ₹2,00,000 ✔
Check: 4,50,000 + 1,50,000 + 2,00,000 = ₹8,00,000 ✔. The cash movements cancel out exactly here, which is a nice sign that the arithmetic is right.
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| (i) | Ishaan’s Capital A/c Dr. To Bank A/c (Excess capital withdrawn) | 30,000 | 30,000 | |
| (ii) | Bank A/c Dr. To Jyoti’s Capital A/c (Deficiency in capital brought in) | 30,000 | 30,000 |
If the question says the difference is “brought in or withdrawn in cash”, route it through Bank. If it says the adjustment is “through Current Accounts”, open Current Accounts instead — a credit balance goes on the liabilities side, a debit balance on the assets side, and the Bank balance is untouched. Follow the wording exactly; both are correct answers to different questions.
Why it works: both directions are the same equation read from opposite ends. Capital of one partner divided by his fractional share always gives the total capital of the firm, provided capitals are in the profit-sharing ratio. Direction A knows the old partners’ side and solves for the new partner. Direction B knows the new partner and solves for the old partners.
Partners’ Capital Accounts and the New Balance Sheet
All the work you have done so far lands in two places: the Partners’ Capital Accounts, and the Balance Sheet of the reconstituted firm. Get the layout right and the marks follow. Here is the map of where everything goes.
| Debit side of Capital A/c | Credit side of Capital A/c |
|---|---|
| To Profit and Loss A/c (Dr. balance) To Advertisement Suspense A/c To Revaluation A/c (loss) To Goodwill A/c (existing goodwill written off) To Capital/Current A/c of a sacrificing partner (if this partner gained) To Bank A/c (excess capital withdrawn) To Balance c/d | By Balance b/d By General Reserve / P and L (Cr.) / WCR surplus / IFR surplus By Revaluation A/c (profit) By Premium for Goodwill A/c By Bank A/c (capital and deficiency brought in) By Current A/c of the new partner (goodwill not brought in) |
A partner’s Current A/c with a credit balance is money the firm owes him — it goes on the liabilities side. A Current A/c with a debit balance is money he owes the firm — it goes on the assets side. This single line rescues a lot of Balance Sheets that refuse to tie.
| BALANCE SHEET OF THE RECONSTITUTED FIRM | |||
|---|---|---|---|
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 1,20,000 | Bank | 2,45,000 |
| Bills Payable | 35,000 | Debtors 2,00,000 Less: Provision 10,000 | 1,90,000 |
| Workmen Compensation Claim | 25,000 | Stock | 1,60,000 |
| Outstanding Rent | 15,000 | Machinery | 3,50,000 |
| Capitals: Deepak 5,90,000 Esha 3,60,000 Farid 2,40,000 | 11,90,000 | Building | 4,00,000 |
| Farid’s Current A/c | 40,000 | ||
| Total | 13,85,000 | Total | 13,85,000 |
General Reserve, Profit and Loss A/c, Advertisement Suspense, Investment Fluctuation Reserve, Workmen Compensation Reserve and any existing Goodwill are all closed during admission. None of them survives into the new Balance Sheet. What may survive is Workmen Compensation Claim (the amount actually payable) and a partner’s Current A/c balance.
Changes in the Partnership Deed on Admission
Admission is not only about ratios and rupees on day one. The old partnership deed dies and a new one is signed, and the new deed usually carries fresh terms — interest on capital, a salary or commission to a partner, and very often a guarantee of minimum profit to tempt the new partner in. These clauses show up in the very next year’s Profit and Loss Appropriation Account, and CBSE loves pairing them with an admission question. (Strictly, guarantee of profit and interest on capital sit in your Fundamentals chapter rather than in Admission — but examiners regularly fold them into the first year after a new partner joins, so treat this section as a quick recap rather than something missing from your textbook.)
First divide the profit in the ordinary new ratio, ignoring the guarantee. Then compare the guaranteed partner’s share with his guaranteed minimum. If his share falls short, the deficiency is borne by the guaranteeing partners — in the ratio the deed specifies, or, if the deed is silent, in the ratio in which they share profits. If his share already exceeds the guarantee, the guarantee simply does not bite.
Step 1 — divide normally. Total parts = 12 + 8 + 5 = 25.
P = 4,00,000 × 12/25 = ₹1,92,000
Q = 4,00,000 × 8/25 = ₹1,28,000
R = 4,00,000 × 5/25 = ₹80,000
(1,92,000 + 1,28,000 + 80,000 = 4,00,000 ✔)
Step 2 — test the guarantee. R gets ₹80,000 but is guaranteed ₹1,00,000, so the deficiency is ₹20,000.
Step 3 — share the deficiency 3 : 2. P bears 20,000 × 3/5 = ₹12,000; Q bears 20,000 × 2/5 = ₹8,000.
Final: P = 1,92,000 − 12,000 = ₹1,80,000; Q = 1,28,000 − 8,000 = ₹1,20,000; R = ₹1,00,000.
Check: 1,80,000 + 1,20,000 + 1,00,000 = ₹4,00,000 ✔
Interest on capital @ 6%: P = ₹28,800; Q = ₹19,200; R = ₹12,000 (total ₹60,000)
R’s salary: 5,000 × 12 = ₹60,000
Divisible profit = 6,00,000 − 60,000 − 60,000 = ₹4,80,000
P = 4,80,000 × 12/25 = ₹2,30,400
Q = 4,80,000 × 8/25 = ₹1,53,600
R = 4,80,000 × 5/25 = ₹96,000
(2,30,400 + 1,53,600 + 96,000 = 4,80,000 ✔)
Total earnings: P ₹2,59,200; Q ₹1,72,800; R ₹12,000 + 60,000 + 96,000 = ₹1,68,000.
Check: 2,59,200 + 1,72,800 + 1,68,000 = ₹6,00,000 ✔
Because the capitals are fixed, all of this is credited to the partners’ Current Accounts, not their Capital Accounts.
Interest on a partner’s loan to the firm is a charge against profit (it goes to the Profit and Loss Account, at 6% p.a. if the deed is silent), whereas interest on capital is an appropriation of profit (it goes to the Profit and Loss Appropriation Account, and only if the deed allows it). A partner’s loan is also never transferred to his Capital Account on admission or any other reconstitution — it stays on the Balance Sheet as a separate liability. Mixing these two up is a classic one-mark loss.
A Full Board-Style Question, Start to Finish
Here it is — everything at once, exactly the way it appears in the board paper. Do not read the solution yet. Copy the question onto a page, set a 20-minute timer, and attempt it. Then come back and compare line by line. Being 90% right and knowing which 10% went wrong is worth far more than reading a perfect answer.
| BALANCE SHEET OF P AND Q AS AT 31ST MARCH 2026 | |||
|---|---|---|---|
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors | 1,10,000 | Cash at Bank | 85,000 |
| Bills Payable | 40,000 | Debtors 1,50,000 Less: Provision 10,000 | 1,40,000 |
| General Reserve | 75,000 | Stock | 1,30,000 |
| Workmen Compensation Reserve | 30,000 | Furniture | 1,00,000 |
| Capitals: P 4,00,000 Q 3,00,000 | 7,00,000 | Land and Building | 4,50,000 |
| Advertisement Suspense A/c | 50,000 | ||
| Total | 9,55,000 | Total | 9,55,000 |
(a) R brings ₹2,00,000 as capital and ₹60,000 as his share of premium for goodwill, in cash. P and Q continue to share between themselves in their old ratio.
(b) Land and Building is to be appreciated by 20%.
(c) Stock is found overvalued by ₹10,000.
(d) Provision for doubtful debts is to be maintained at 8% of debtors.
(e) Furniture is to be depreciated by 15%.
(f) A claim on account of workmen compensation of ₹18,000 is to be provided for.
(g) A creditor of ₹7,000, not recorded in the books, is to be brought in.
(h) The capitals of P and Q are to be adjusted in the new profit-sharing ratio on the basis of R’s capital, any surplus to be withdrawn in cash.
Prepare the Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.
WN 1: New ratio and sacrificing ratio.
R takes 1/5, so P and Q share 4/5 in 3 : 2.
P = 3/5 × 4/5 = 12/25 | Q = 2/5 × 4/5 = 8/25 | R = 5/25. New ratio 12 : 8 : 5.
Sacrifice: P = 15/25 − 12/25 = 3/25; Q = 10/25 − 8/25 = 2/25. Sacrificing ratio 3 : 2 (total 5/25 = 1/5 ✔).
WN 2: Revaluation figures.
Land and Building: 20% of 4,50,000 = +₹90,000 → new value ₹5,40,000
Stock: −₹10,000 → ₹1,20,000
Provision: 8% of 1,50,000 = ₹12,000; existing ₹10,000, so extra −₹2,000
Furniture: 15% of 1,00,000 = −₹15,000 → ₹85,000
Unrecorded creditor: −₹7,000 → creditors ₹1,17,000
(The workmen compensation claim is not a revaluation item — it comes out of the reserve.)
WN 3: Reserves.
General Reserve ₹75,000 → P ₹45,000, Q ₹30,000
WCR ₹30,000 less claim ₹18,000 = ₹12,000 → P ₹7,200, Q ₹4,800
Advertisement Suspense ₹50,000 → debit P ₹30,000, Q ₹20,000
WN 4: Premium for goodwill ₹60,000 in 3 : 2 → P ₹36,000, Q ₹24,000. (Implied goodwill of the firm = 60,000 × 5 = ₹3,00,000.)
| REVALUATION ACCOUNT | |||
|---|---|---|---|
| Dr. Particulars | Amount (₹) | Particulars | Amount (₹) Cr. |
| To Stock A/c | 10,000 | By Land and Building A/c | 90,000 |
| To Provision for Doubtful Debts A/c | 2,000 | ||
| To Furniture A/c | 15,000 | ||
| To Creditors A/c (unrecorded) | 7,000 | ||
| To Profit transferred to: P’s Capital A/c 33,600 Q’s Capital A/c 22,400 | 56,000 | ||
| Total | 90,000 | Total | 90,000 |
| PARTNERS’ CAPITAL ACCOUNTS | ||||||
|---|---|---|---|---|---|---|
| Dr. Particulars | P | Q | R | Particulars | P | Q R Cr. |
| To Advertisement Suspense A/c | 30,000 | 20,000 | — | By Balance b/d | 4,00,000 | 3,00,000 — |
| To Bank A/c (excess withdrawn) | 11,800 | 41,200 | — | By Bank A/c (capital) | — | — 2,00,000 |
| To Balance c/d | 4,80,000 | 3,20,000 | 2,00,000 | By Premium for Goodwill A/c | 36,000 | 24,000 — |
| By General Reserve A/c | 45,000 | 30,000 — | ||||
| By Workmen Compensation Reserve A/c | 7,200 | 4,800 — | ||||
| By Revaluation A/c (profit) | 33,600 | 22,400 — | ||||
| Total | 5,21,800 | 3,81,200 | 2,00,000 | Total | 5,21,800 | 3,81,200 2,00,000 |
P should have 10,00,000 × 12/25 = ₹4,80,000; his adjusted capital is ₹4,91,800, so he withdraws ₹11,800.
Q should have 10,00,000 × 8/25 = ₹3,20,000; his adjusted capital is ₹3,61,200, so he withdraws ₹41,200.
Total cash paid out = ₹53,000.
WN 6: Bank. 85,000 + 2,00,000 (R’s capital) + 60,000 (premium) − 53,000 = ₹2,92,000.
| BALANCE SHEET OF P, Q AND R AS AT 1ST APRIL 2026 | |||
|---|---|---|---|
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Creditors (1,10,000 + 7,000) | 1,17,000 | Cash at Bank | 2,92,000 |
| Bills Payable | 40,000 | Debtors 1,50,000 Less: Provision 12,000 | 1,38,000 |
| Workmen Compensation Claim | 18,000 | Stock | 1,20,000 |
| Capitals: P 4,80,000 Q 3,20,000 R 2,00,000 | 10,00,000 | Furniture | 85,000 |
| Land and Building | 5,40,000 | ||
| Total | 11,75,000 | Total | 11,75,000 |
Practice Worksheet
Ten questions, easy to hard. Do them on paper with a pen, not in your head. Reveal an answer only after you have committed to yours — that moment of “oh, THAT is where I went wrong” is where the learning actually happens.
Show Answer
Pranav = 7/10 × 7/10 = 49/100
Qamar = 3/10 × 7/10 = 21/100
Rina = 3/10 = 30/100
Check: 49 + 21 + 30 = 100 ✔ New ratio = 49 : 21 : 30.
Sacrifice: Pranav = 70/100 − 49/100 = 21/100; Qamar = 30/100 − 21/100 = 9/100.
Sacrificing ratio = 21 : 9 = 7 : 3, which is the old ratio — exactly what you expect when the old partners keep their mutual ratio unchanged. Total sacrifice 30/100 = 3/10 ✔
Show Answer
Aman = 3/5 − 1/8 = 24/40 − 5/40 = 19/40 = 57/120
Bhavesh = 2/5 − 1/24 = 48/120 − 5/120 = 43/120
Charu = 1/6 = 20/120
Check: 57 + 43 + 20 = 120 ✔ New ratio = 57 : 43 : 20.
Sacrificing ratio = 1/8 : 1/24 = 3/24 : 1/24 = 3 : 1.
Note how the sacrificing ratio here is nothing like the old ratio of 3 : 2 — this is why goodwill must never be shared in the old ratio out of habit.
Show Answer
Yusuf sacrifices = 1/3 × 3/8 = 1/8
Zainab’s share = 1/8 + 1/8 = 2/8 = 1/4
Xerxes = 5/8 − 1/8 = 4/8 | Yusuf = 3/8 − 1/8 = 2/8 | Zainab = 2/8
Check: 4 + 2 + 2 = 8 ✔ New ratio = 4 : 2 : 2 = 2 : 1 : 1.
Sacrificing ratio = 1/8 : 1/8 = 1 : 1. Two partners with very different shares can still sacrifice equally — it depends entirely on the fraction each surrenders.
Show Answer
40% withdrawn: Ayesha ₹40,000, Bharat ₹20,000, total ₹60,000.
1. Bank A/c Dr. ₹5,50,000 / To Chandan’s Capital A/c ₹4,00,000; To Premium for Goodwill A/c ₹1,50,000
(Capital and premium brought in by Chandan)
2. Premium for Goodwill A/c Dr. ₹1,50,000 / To Ayesha’s Capital A/c ₹1,00,000; To Bharat’s Capital A/c ₹50,000
(Premium credited in sacrificing ratio 2 : 1)
3. Ayesha’s Capital A/c Dr. ₹40,000; Bharat’s Capital A/c Dr. ₹20,000 / To Bank A/c ₹60,000
(40% of the premium withdrawn by the old partners)
Net cash left in the firm from these entries = 5,50,000 − 60,000 = ₹4,90,000.
Show Answer
Sacrificing ratio 3 : 2 → Mehul ₹60,000, Nandini ₹40,000 (total ₹1,00,000 ✔).
1. Bank A/c Dr. ₹5,60,000 / To Omkar’s Capital A/c ₹5,00,000; To Premium for Goodwill A/c ₹60,000
(Capital and part of the premium brought in)
2. Premium for Goodwill A/c Dr. ₹60,000; Omkar’s Current A/c Dr. ₹40,000 / To Mehul’s Capital A/c ₹60,000; To Nandini’s Capital A/c ₹40,000
(Omkar’s full share of goodwill credited to the sacrificing partners in 3 : 2)
Total debits ₹1,00,000 = total credits ₹1,00,000 ✔. Omkar’s Current A/c will appear on the assets side of the new Balance Sheet at ₹40,000.
Show Answer
Rehan’s adjusted capital = 6,00,000 + 80,000 = ₹6,80,000
Sara’s adjusted capital = 3,60,000 + 40,000 = ₹4,00,000
Step 2 — implied total capital. Tanvi pays ₹4,00,000 for 1/4, so the firm is valued at 4,00,000 × 4 = ₹16,00,000.
Step 3 — actual combined capital. 6,80,000 + 4,00,000 + 4,00,000 = ₹14,80,000.
Hidden goodwill = 16,00,000 − 14,80,000 = ₹1,20,000
Tanvi’s share = 1/4 × 1,20,000 = ₹30,000, shared 2 : 1 → Rehan ₹20,000, Sara ₹10,000 (✔ 30,000).
Entry: Tanvi’s Capital A/c Dr. ₹30,000 / To Rehan’s Capital A/c ₹20,000; To Sara’s Capital A/c ₹10,000
(Tanvi’s share of hidden goodwill adjusted in the sacrificing ratio 2 : 1)
If you forgot to add the General Reserve in Step 1, you would have got a hidden goodwill of ₹2,40,000 — double the correct figure. That is the whole trap in this question.
Show Answer
Stock 10% of 1,80,000 = ₹18,000
Machinery 8% of 3,00,000 = ₹24,000
Provision: required 5% of 1,80,000 = ₹9,000; existing ₹4,000; extra = ₹5,000
Outstanding repairs = ₹7,000
Total losses = ₹54,000
Gains (credit side):
Building 12% of 5,00,000 = ₹60,000
Creditors written back = ₹9,000
Total gains = ₹69,000
Profit on Revaluation = 69,000 − 54,000 = ₹15,000, credited to Ankit ₹11,250 and Bela ₹3,750 in the old ratio 3 : 1 (✔ 15,000).
Revaluation Account totals: ₹69,000 on each side.
Watch the provision line — only the ₹5,000 increase is a revaluation loss, but the Balance Sheet must show the full ₹9,000 deducted from debtors.
Show Answer
WCR: claim ₹18,000 stays as a liability; balance ₹32,000 → Devika ₹20,000, Eshan ₹12,000
IFR: fall = 2,40,000 − 2,20,000 = ₹20,000 absorbed by the reserve; balance ₹16,000 → Devika ₹10,000, Eshan ₹6,000
P and L (Cr.) ₹40,000 → Devika ₹25,000, Eshan ₹15,000
Advertisement Suspense ₹24,000 → debit Devika ₹15,000, Eshan ₹9,000
Net credit: Devika = 60,000 + 20,000 + 10,000 + 25,000 − 15,000 = ₹1,00,000
Eshan = 36,000 + 12,000 + 6,000 + 15,000 − 9,000 = ₹60,000
Cross-check: total distributed = (96,000 + 32,000 + 16,000 + 40,000) − 24,000 = ₹1,60,000, and 1,00,000 + 60,000 = ₹1,60,000 ✔, in the ratio 5 : 3 ✔
On the new Balance Sheet, Investments appear at ₹2,20,000 and Workmen Compensation Claim at ₹18,000.
Show Answer
Adjusted capitals:
Gauri = 5,00,000 + 48,000 (goodwill) + 24,000 (revaluation) + 36,000 (reserve) = ₹6,08,000
Hemant = 3,00,000 + 32,000 + 16,000 + 24,000 = ₹3,72,000
Total capital based on Ismail = 3,00,000 × 4 = ₹12,00,000
Gauri should have = 12,00,000 × 9/20 = ₹5,40,000 → withdraws ₹68,000
Hemant should have = 12,00,000 × 6/20 = ₹3,60,000 → withdraws ₹12,000
Ismail = ₹3,00,000
Check: 5,40,000 + 3,60,000 + 3,00,000 = ₹12,00,000 ✔ and the closing capitals are in 9 : 6 : 5 ✔
Nikhil is admitted on 1st April 2026 for a 1/4 share on these terms: (a) he brings ₹2,40,000 as capital, and his share of goodwill is valued at ₹80,000 of which he brings 60% in cash; (b) investments are to be valued at ₹88,000; (c) stock is to be reduced by ₹10,000; (d) plant and machinery is to be appreciated by ₹30,000; (e) a provision for doubtful debts at 5% is to be created on debtors; (f) outstanding expenses are to be reduced to ₹12,000; (g) an unrecorded computer worth ₹20,000 is to be brought into the books. Prepare the Revaluation Account, Partners’ Capital Accounts and the new Balance Sheet.
Show Answer
Lata = 5/8 × 3/4 = 15/32; Manav = 3/8 × 3/4 = 9/32; Nikhil = 8/32. New ratio 15 : 9 : 8.
Sacrifice: Lata 20/32 − 15/32 = 5/32; Manav 12/32 − 9/32 = 3/32. Sacrificing ratio 5 : 3 (total 8/32 = 1/4 ✔).
WN 2 — Revaluation Account.
Debit (losses): Stock ₹10,000; Provision for Doubtful Debts 5% of 1,20,000 = ₹6,000. Total ₹16,000.
Credit (gains): Plant and Machinery ₹30,000; Outstanding Expenses written back (18,000 − 12,000) ₹6,000; Computer (unrecorded asset) ₹20,000. Total ₹56,000.
Profit = 56,000 − 16,000 = ₹40,000 → Lata ₹25,000, Manav ₹15,000. Both sides of the account total ₹56,000.
Note: the fall in investments is not a revaluation item — it is absorbed by the Investment Fluctuation Reserve.
WN 3 — Reserves and accumulated loss.
General Reserve ₹48,000 → Lata ₹30,000, Manav ₹18,000
IFR ₹20,000 less fall (1,00,000 − 88,000) ₹12,000 = ₹8,000 → Lata ₹5,000, Manav ₹3,000
Profit and Loss A/c (Dr.) ₹40,000 → debit Lata ₹25,000, Manav ₹15,000
WN 4 — Goodwill. Nikhil’s share ₹80,000; he brings 60% = ₹48,000 in cash, and ₹32,000 is debited to his Current A/c. Credited in 5 : 3 → Lata ₹50,000, Manav ₹30,000 (✔ 80,000).
WN 5 — Capital Accounts.
Lata = 3,20,000 + 25,000 + 30,000 + 5,000 + 50,000 − 25,000 = ₹4,05,000
Manav = 2,40,000 + 15,000 + 18,000 + 3,000 + 30,000 − 15,000 = ₹2,91,000
Nikhil = ₹2,40,000
WN 6 — Bank. 62,000 + 2,40,000 + 48,000 = ₹3,50,000
BALANCE SHEET AS AT 1ST APRIL 2026
Liabilities: Sundry Creditors ₹1,32,000; Outstanding Expenses ₹12,000; Capitals — Lata ₹4,05,000, Manav ₹2,91,000, Nikhil ₹2,40,000 (₹9,36,000). Total ₹10,80,000
Assets: Bank ₹3,50,000; Debtors ₹1,20,000 less Provision ₹6,000 = ₹1,14,000; Stock ₹86,000; Investments ₹88,000; Plant and Machinery ₹2,90,000; Land ₹1,00,000; Computer ₹20,000; Nikhil’s Current A/c ₹32,000. Total ₹10,80,000 ✔
If your Balance Sheet did not tie, check three things in order: (1) did you put Nikhil’s Current A/c of ₹32,000 on the assets side? (2) did you reduce Outstanding Expenses to ₹12,000? (3) did you route the ₹12,000 fall in investments through the IFR rather than the Revaluation Account?
That is the whole chapter. Every board question on Admission of a Partner is a rearrangement of what you have just practised.
You will not master this in one evening, and you are not supposed to. Do three admission questions tonight. Tomorrow, do three more and get one more of them fully right than you did today. A Balance Sheet that ties on the first attempt is a skill built by repetition, not by talent. Small daily improvement, compounded over a term, is what turns this chapter from your weakest into your most reliable eight marks.