Adjustments on Admission of Partner

When a new partner joins a partnership firm, he is said to be admitted into partnership.

He is required to bring the following:

1. Capital for his share in the firm.

2. Goodwill for his share in the future profits.

New partner will enjoy the following rights after his admission:

1. His share in the future profits of the firm.

2. His share in the assets of the firm.

3. All other rights as a partner like right to be consulted, right to participate in decision making etc.

Adjustments required at the time of admission of the new partner from accounting point of view:

  1. Calculation of new profit sharing ratio.
  2. Accounting treatment of goodwill.
  3. Revaluation of assets and liabilities.
  4. Treatment of reserves, accumulated profits/ losses.
  5. Adjustment of partners' capitals.