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Reconstitution of Partnership : Admission of a Partner

ICSE · Class 12 · Accountancy

Quick revision notes for Reconstitution of Partnership : Admission of a Partner — ICSE Class 12 Accountancy. Key concepts, formulas, and definitions for last-minute revision.

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Key Topics to Revise

1

Reconstitution of Partnership — Meaning and Occasions

  • Reconstitution means a change in the existing partnership agreement that brings the old agreement to an end and creates a new one.
  • The firm continues to exist even after reconstitution; only the agreement changes.
  • Occasions of reconstitution: (1) Admission of a new partner, (2) Retirement of a partner, (3) Death of a partner, (4) Change in profit sharing ratio among existing partners, (5) Amalgamation of two pa
2

New Profit Sharing Ratio — Calculation

  • New Profit Sharing Ratio is the ratio in which ALL partners (old + new) will share future profits and losses.
  • Formula: New Share = Old Share − Sacrifice Share
  • Case 1: When only new partner's share is given → Old partners share the remaining profit in their OLD ratio.
3

Sacrificing Ratio — Calculation

  • Sacrificing Ratio is the ratio in which OLD partners agree to give up (sacrifice) their share of profit in favour of the incoming partner.
  • Formula: Sacrificing Ratio = Old Ratio − New Ratio
  • The goodwill brought in by the new partner is distributed among OLD partners in their SACRIFICING RATIO.
4

Accounting Treatment of Goodwill

  • AS-26 (Accounting Standard): Only PURCHASED goodwill can be recorded in the books. Internally generated (self-generated) goodwill cannot be recognised as an asset.
  • At the time of admission, if no cash consideration is paid, goodwill cannot be shown in the books.
  • If goodwill already appears in the Balance Sheet, it MUST be written off in old partners' OLD ratio before any other adjustment.

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Full Notes

Key Concepts

Any change in the existing partnershipUnder Section 30 of the IndianThe ratio in which ALL partnersThe ratio in which old partnersGoodwill compensates old partners for past

Frequently Asked Questions

What are the important topics in Reconstitution of Partnership : Admission of a Partner for ICSE Class 12 Accountancy?
Key topics in Reconstitution of Partnership : Admission of a Partner include Overview of Admission of a Partner: Key Concepts, Admission of a Partner — Complete Concept Map, Chapter Overview: Admission of a Partner. These are the concepts ICSE Class 12 examiners draw on most — study them first, then practise related questions.
How to score full marks in Reconstitution of Partnership : Admission of a Partner — ICSE Class 12 Accountancy?
Start by understanding all key concepts. Practise previous year questions from this chapter. Revise formulas and definitions regularly. Use flashcards for quick revision before the exam.

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