Accounting Treatment for Admission of New Partner in Partnership Firm

The video tutorial discusses the changes in a partnership firm when a new partner, Miss Lucy, joins. It covers the reconstitution of the partnership, changes in profit-sharing ratios, and the concept of sacrificing ratio. The tutorial explains the valuation of goodwill and its accounting treatment, as well as the revaluation of assets and liabilities. It concludes with the impact on financial statements and the account closing process.

What was the main reason for Miss Lucy joining the partnership firm M/S JDJ?

• She had extensive knowledge about the target customers.

• She was looking to invest a large sum of money.

• She wanted to set up a business but lacked capital.

• She had prior experience in managing a partnership firm.

What is the new profit-sharing ratio after Miss Lucy joins the partnership?

• 5:2:2:1

• 3:3:2:2

• 4:2:1:3

• 5:3:2:1

What is the term used for the share given up by existing partners in favor of a new partner?

• Profit ratio

• Sacrificing ratio

• Goodwill ratio

• Capital ratio

What is the significance of goodwill in a partnership firm?

• It is a liability that needs to be settled annually.

• It is a mandatory contribution by new partners.

• It represents the firm's reputation and is an intangible asset.

• It is a tangible asset that can be sold.

How is goodwill treated when a new partner is admitted?

• It is converted into a tangible asset.

• It is divided among old partners in their old ratio.

• It is shared with the new partner.

• It is ignored in the new agreement.

Why is it necessary to revalue assets and liabilities when a new partner is admitted?

• To ensure the new partner gains from past profits.

• To reduce the firm's liabilities.

• To show the true position of the firm.

• To increase the firm's capital.

What happens if the value of an asset is increased during revaluation?

• The asset is sold at a higher price.

• The existing partners' capital is increased.

• The new partner's capital is increased.

• The firm's liabilities are decreased.

What is the impact on financial statements after a new partner is admitted?

• The financial statements are not affected.

• The format of the profit and loss account changes.

• The account closing process is necessary.

• The balance sheet format changes.

What is the purpose of the account closing process after a new partner joins?

• To revalue the firm's assets.

• To change the profit-sharing ratio.

• To calculate the net gain or loss for old partners.

• To inform outside stakeholders about the new partner.

How are profits handled in the financial statements after a new partner is admitted?

• They are divided equally among all partners.

• They are transferred to the new partner's capital account.

• They are closed and transferred to old partners' capital accounts.

• They are ignored in the financial statements.