Preparing Final Statements for Partnership Firms: Admission of a New Partner

The video tutorial covers partnership accounting, focusing on preparing financial statements, handling adjustments, and closing accounts. It explains the differences between partnership and sole trading accounts, and details the process of admitting a new partner, including calculating new profit sharing ratios and revaluating assets and liabilities.

What differentiates the financial statements of a partnership from those of a sole trader?

• Use of a different balance sheet format

• Inclusion of partners' capital and current accounts

• Exclusion of profit and loss account

• Different accounting principles

How is interest on capital treated in partnership accounting?

• As a liability

• As an asset

• As an expense for the firm

• As an income for the firm

What is the principle used to record closing stock in partnership accounting?

• Historical cost principle

• Revenue recognition principle

• Matching principle

• Conservatism principle

When a new partner is admitted, what is the first step in adjusting the accounts?

• Closing the old accounts

• Distribution of goodwill

• Calculation of new profit sharing ratio

• Revaluation of assets

How is goodwill treated when a new partner is admitted?

• It is ignored

• It is distributed among old partners

• It is added to the new partner's capital

• It is deducted from the firm's profits

What happens to the value of an asset when it is revalued upwards?

• It is credited in the revaluation account

• It is ignored

• It is deducted from the balance sheet

• It is debited in the revaluation account

How are bad debts treated in the revaluation process?

• Added to the debtors

• Ignored

• Debited in the revaluation account

• Credited in the revaluation account