Key Concepts & MCQ on Admission of a New Partner in Partnership Accounts
MCQ on Admission of New Partner focuses on concepts like adjusting profit sharing ratios, goodwill, and partner capital when a new partner is admitted into a firm. This topic is crucial for Class 12 Accountancy students preparing for board and competitive exams, as well as for real business scenarios where partnership structures change.
| Key Concept | Description | Typical MCQ Focus |
|---|---|---|
| Profit Sharing Ratio | The new way of sharing profits among partners after admission. | Calculation of new and sacrificing ratios |
| Goodwill | Compensation to old partners for sharing future profits with the new partner. | Goodwill calculation and adjustment journal entries |
| Capital Adjustment | Rearranging capital balances for all partners as per new terms. | Capital brought by new partner and adjustment entries |
| Revaluation Account | Assessing assets and liabilities for changes in value. | MCQs on asset/liability revaluation and effect on capital |
MCQ on Admission of New Partner: Main Concepts
Admission of a new partner means that an individual joins an existing partnership. This often results in changes to profit sharing, capital balances, and accounting procedures. Understanding this topic ensures you answer conceptual, theoretical, and calculation-based MCQs accurately in your exams.
Key Rules and Procedures During Admission
- All existing partners must agree to the new partner's admission.
- The new profit sharing ratio and sacrificing ratio are recalculated.
- Goodwill is compensated by the new partner, often in cash or capital adjustment.
- Assets and liabilities may be revalued through a Revaluation Account.
- Existing reserves and accumulated profits typically belong to old partners.
Examples of Admission Cases
- Profit Sharing Change: A, B, and C are partners. When D is admitted, the ratio changes and calculation is required.
- Goodwill Calculation: D brings goodwill. The entry is made in the books, compensating A, B, and C as per sacrificing ratio.
- Revaluation: When assets are revalued, profit or loss is distributed among old partners before the new partner enters.
MCQ Practice: Admission of a New Partner
- The new partner is admitted only with the (a) Consent of all old partners (b) Consent of majority (c) Consent of any one partner (d) None of these.
Answer: (a) - Goodwill on admission is generally shared in the (a) New ratio (b) Sacrificing ratio (c) Equal ratio (d) Capital ratio.
Answer: (b) - Capital brought in by the new partner is credited to: (a) Goodwill Account (b) Bank Account (c) New Partner’s Capital Account (d) Reserve Account.
Answer: (c) - Sacrificing ratio is calculated as: (a) Old ratio – New ratio (b) New ratio – Old ratio (c) Old ratio × New ratio (d) None.
Answer: (a) - Accumulated profits at the time of admission are shared: (a) Among all partners (b) Among old partners (c) Among new partners (d) None of these.
Answer: (b)
For more exam-style MCQs on this topic, check the Chapter 4 Accountancy Solutions and Vedantu’s dedicated practice resources.
Quick Revision Table: Important Formulas and Journal Entries
| Area | Formula / Entry | Usage |
|---|---|---|
| New Profit Sharing Ratio | Old Partner's Share - Sacrifice + Gained Share | Determine future profit-sharing |
| Sacrificing Ratio | Old Ratio – New Ratio (Partner-wise) | Goodwill compensation calculation |
| Goodwill Brought in Cash | Bank A/c Dr. To Goodwill A/c To Old Partners’ Capital A/cs (as per sacrificing ratio) |
Adjust incoming partner’s goodwill payment |
| Revaluation Profit | Distributed among old partners in old ratio | Revaluation Account closing |
Why is MCQ on Admission of New Partner Important?
This topic is essential for students aiming for high grades in school and national exams. MCQs test both theory and calculations. Knowledge helps in topics like Retirement of a Partner and Partnership Reconstitution.
Additional Learning Tips from Vedantu
- Revise with practice PDFs for offline study.
- Use short, step-wise solutions for better recall during exams.
- Refer to the Partnership Deed page for detailed clauses often asked in MCQs.
Related Resources for Further Study
- Admission of a Partner – In-depth concept explanation
- Reconstitution of Partnership Firm – Changes to partnership structures
- Sacrificing Ratio – Calculation steps for MCQs
- Goodwill – Accounting treatments clarified
- New Profit Sharing Ratio – Calculation methods
To summarize, MCQ on Admission of New Partner equips students with skills to manage partnership changes, profit distribution, and goodwill settlement. Mastery of this topic ensures confidence in board exams and practical accounting cases. At Vedantu, students can access additional practice sets and clear explanations for all key Commerce topics.
FAQs on Admission of a New Partner: MCQ Practice and Concepts
1. What is the admission of a new partner in a firm?
The admission of a new partner signifies a new individual joining an existing partnership firm. This often involves contributions of capital or expertise and adheres to the stipulations outlined in the Partnership Act 1932. The process necessitates adjustments to the profit-sharing ratio, accounting for goodwill, and potentially involves capital adjustments.
2. What increases at the time of the admission of a new partner?
The admission of a new partner typically leads to an increase in the firm's overall capital and available resources. This is a key concept tested in many MCQs on this topic. The new partner's contribution directly boosts the firm's financial standing. The impact on other aspects like reserves and profits is governed by the accounting treatment of the admission.
3. What topics are covered in MCQs on admission of a partner?
MCQs on the admission of a new partner cover several crucial aspects of partnership accounting. These include: calculating the new profit-sharing ratio, understanding the sacrificing ratio, accounting for goodwill, handling revaluation, managing capital adjustments, and understanding the relevant clauses within the partnership deed. These are all essential topics for Class 12 Accountancy examinations.
4. Why is the new profit sharing ratio important?
The new profit-sharing ratio is crucial because it determines each partner's share of future profits and losses. Accurate calculation of this ratio is essential for correct accounting entries and ensures that profits are distributed fairly amongst all partners according to their agreed-upon shares. It's a vital element in understanding partnership reconstitution.
5. How should goodwill be treated upon admission of a new partner?
Goodwill must be valued upon the admission of a new partner. The incoming partner typically compensates the existing partners for their share of the goodwill, based on the sacrificing ratio. This compensation can be made through a direct cash payment or an adjustment to the capital accounts. Understanding goodwill adjustment is a common MCQ question in Accountancy.
6. What journal entries are passed for capital adjustment at the time of admission of a new partner?
Capital adjustments upon a new partner's admission involve journal entries crediting the new partner's capital account for their contribution. Adjustments to the existing partners' capital accounts might also be necessary to reflect changes in profit-sharing and capital balances as outlined in the partnership agreement. These entries are crucial for maintaining accurate financial records within the partnership.
7. When is the sacrificing ratio calculated, and why?
The sacrificing ratio is calculated when there's a change in the profit-sharing ratio due to the admission of a new partner. This ratio determines how the existing partners share the goodwill brought in by the new partner. It's essential for fair distribution of benefits amongst the existing partners.
8. How does the admission of a partner affect accumulated reserves and profits?
Accumulated reserves and profits are typically distributed among the existing partners in their old profit-sharing ratio *before* the admission of a new partner. This ensures that the new partner does not benefit from the past performance of the firm. The accounting treatment of reserves and profits needs careful consideration before admission.
9. What happens if a proper partnership deed is not present?
In the absence of a formal partnership deed, the Indian Partnership Act governs the rights, duties, and profit-sharing arrangements of the partners. This can lead to potential disputes regarding the terms of admission or other partnership matters. It is therefore highly recommended to have a well-defined partnership deed in place.
10. Can an incoming partner’s liability start before admission?
Generally, an incoming partner's liability does not extend to the firm's debts incurred *before* their admission, unless specifically agreed upon within the partnership deed. Their liability begins only from the date of their admission to the partnership.
