Chapter 3: Reconstitution of Partnership (Admission of Partner)

Balbharati Solutions for Book-keeping and Accountancy 12th Standard HSC Maharashtra State Board.

Chapter 3: Reconstitution of Partnership (Admission of Partner)

Key Accountancy Terms Explained

Reconstitution of Partnership: Changing the existing agreement between partners, which can happen due to admission, retirement, or death of a partner, or a change in the profit-sharing ratio.

Admission of Partner: When a new person joins an existing partnership firm as a partner.

Sacrifice Ratio: The proportion in which old partners agree to give up their share of profit in favour of a new partner.

New Profit Sharing Ratio: The new proportion in which all partners (including the new or remaining partners) will share future profits and losses of the firm.

Goodwill: The good name or reputation of a business, which helps it earn more profit. It's an intangible asset.

Revaluation Account: An account prepared to record changes in the value of assets and liabilities when a partnership is reconstituted.

Assets: Things of value owned by a business (e.g., cash, buildings, machinery, stock).

Liabilities: Amounts owed by the business to outsiders (e.g., loans, creditors).

Book-keeping: The process of recording daily financial transactions in an orderly manner.

Accountancy: The process of recording, classifying, summarizing, interpreting, and communicating financial information.

HSC (Higher Secondary Certificate): An examination taken by students in India after completing their senior secondary education (usually 12th grade).

Syllabus: A list of topics or subjects to be covered in a course of study.

Proforma: A standard document or a template showing the form or layout of something (e.g., Proforma of a Balance Sheet).

Trading Account: An account prepared to find out the gross profit or gross loss of a business during a specific period.

Profit & Loss Account: An account prepared to find out the net profit or net loss of a business during a specific period.

Balance Sheet: A statement showing the financial position of a business by listing its assets and liabilities on a specific date.

Adjustments: Changes or corrections made to accounts at the end of an accounting period to present a true and fair view of the financial statements.

Dissolution of Partnership Firm: The process of ending the partnership business, selling its assets, and paying off its liabilities.