Accountancy

SOLUTION The partners share the gain or loss on revaluation of assets and liabilities in their “old profit-sharing ratio”.

SOLUTION (i) To record the effect of revaluation of assets and liabilities. (ii) So that the profit or loss on revaluation of assets and liabilities may be divided amongst the…

SOLUTION It is prepared to find out the profit or loss on revaluation of assets and liabilities at the time of reconstitution of the firm (i.e., Change in profit sharing…

SOLUTION Accumulated profits and losses are distributed amongst the old partners in their old profit-sharing ratio. The new partner should not share such profits or losses because these arose before…

SOLUTION Unless given otherwise, the ratio of sacrifice of old partners in the case of admission of a new partner will always be equal to their old ratio.

SOLUTION Sacrifice ratio is calculated because the premium for goodwill brought in by the incoming partner is divided among old partners in their sacrificing ratio.

SOLUTION The old partners share the amount of premium for goodwill in the sacrificing ratio. The formula is: Sacrificing Ratio = Old Ratio - New Ratio.

SOLUTION When a firm requires more capital to expand its business, it may admit a new partner.

SOLUTION (i)Right to share future profits of the firm, and (ii) Right to share the assets of the firm.