Admission in Partnership Accounting

Admission in Partnership Accounting

Admission in partnership or accounting for admission in partnership has been briefly explained in this article. Partnership may be changed for the following reason.

a)    Admission of partner

b)   Death of partner

c)    Retirement of partner

It is important to note that in each of above case the partnership end and a new partnership take its place.

Accounting Treatment Admission of Partner

a)    Goodwill calculated

b)   Calculated Goodwill transferred to partner account in old partnership ratio.

c)    Remove Goodwill in new partnership (new ratios).

d)   New partner capitals are accounted for in books of accounts.

Example of Admission of Partner Accounting

Profit Share ratio (A,B)= 40% & 60%

C is admitted and new ratio= 30% 30% , 40%

New Capital introduced by C= 70,000

Each partner has Share Capital= 100,000

C also brought Share Capital= 100,000

Goodwill= 50,000

A= 50,000 x 40%= 20,000

B=50,000 x 60% =30,000

Recognition of Goodwill

Date	Particulars	Dr	Cr
	Goodwill  A/c	50,000
	A  A/c		20,000
	B  A/c		30,000

Removing Goodwill

Date	Particulars	Dr	Cr
	A A/c	15,000
	B  A/c	15,000
	C  A/c	20,000
	Goodwill A/c		50,000

Introduction of New Capital

Date	Particulars	Dr	Cr
	Cash A/c	70,000
	C A/c		70,000

                                                     A’s Capital Account

Date	Particulars	Dr.	Date	Particulars	Cr.
	Goodwill (Removed)	15,000		Balance B/F	100,000
				Goodwill (Created)	20,000
	Balance  C/D	105,000
		120,000			120,000

                                                   B’s Capital Account

Date	Particulars	Dr.	Date	Particulars	Cr.
	Goodwill (Removed)	15,000		Balance B/F	100,000
	Balance C/d	115,000		Goodwill (Created)	30,000
		130,000			130,000

                                                   C’s Capital Account

Date	Particulars	Dr.	Date	Particulars	Cr.
	Goodwill Removed	20,000		Balance B/F	0
	Balance C/F	80,000		Cash	100,000
		100,000			100,000

                                                   Cash Account

Date	Particulars	Dr.	Date	Particulars	Cr.
	Opening Balance	200,000			0
	Cash	100,000		Balance B/F	300,000
		100,000			300,000

Statement of Financial position (After Admission)

Current Asset (200,000+100,000)	300,000
Capital
A	105,000
B	115,00
C	80,000
	300,000