Updated NCERT Solutions for Class 12 Accountancy Chapter 2 (Admission of a Partner) | Important Questions 2026-27
Struggling with the admission of a new partner? You're in the right place! This guide demystifies Class 12 Accountancy Chapter 2, breaking down complex topics like sacrificing ratio and goodwill. Mastering this chapter is crucial for scoring high in your CBSE board exams and building a strong foundation for CUET.
Chapter NameReconstitution of a Partnership Firm – Admission of a Partner
SubjectAccountancy (Book 1: Accounting for Partnership Firms)
Class12
BoardCBSE
Important TopicsSacrificing Ratio, Goodwill Treatment, Revaluation Account, Capital Accounts
Difficulty LevelMedium to High
Exam WeightageHigh (Often a 6-8 mark comprehensive question)
Learning Objectives
After completing this chapter, students will be able to:
- Explain what reconstitution of a partnership firm means.
- Understand the reasons for admitting a new partner.
- Calculate the new profit-sharing ratio and the sacrificing ratio.
- Define and explain the concept of Goodwill and its different valuation methods.
- Pass the necessary journal entries for the treatment of Goodwill.
- Prepare the Revaluation Account to record changes in the value of assets and liabilities.
- Make adjustments for accumulated profits, reserves, and losses.
- Prepare the Partners' Capital Accounts and the new Balance Sheet of the reconstituted firm.
- Understand and calculate adjustments related to partners' capital.
Key Concepts, Definitions, and Formulas
Here are the most important terms and formulas you must know for your exams.
- Reconstitution of a Partnership Firm: Any change in the existing agreement (Partnership Deed) among partners that leads to a new agreement. Admission of a partner is one form of reconstitution.
- Admission of a Partner: The process of inducting a new person into an existing partnership firm, usually to bring in additional capital or expertise.
- New Profit-Sharing Ratio (NPSR): The ratio in which all partners (including the new one) will share future profits and losses.
- Sacrificing Ratio: The ratio in which the old partners agree to sacrifice their share of profits in favour of the new partner.
- Formula: Sacrificing Ratio = Old Profit-Sharing Ratio – New Profit-Sharing Ratio
- Goodwill: The good name or reputation of the business, which enables it to earn higher profits than the normal profits earned by other firms in the same industry.
- Premium for Goodwill: The amount brought in by the new partner to compensate the old partners for the share of profit they are sacrificing.
- Revaluation Account: A nominal account prepared to record the changes in the value of assets and reassessment of liabilities at the time of reconstitution. Profit or loss on revaluation is transferred to the old partners' capital accounts in their old profit-sharing ratio.
- Hidden Goodwill (or Inferred Goodwill): Goodwill that is not explicitly stated but is inferred from the arrangement. It is calculated based on the total capital of the firm and the profit-sharing ratios.
Full NCERT Solutions (Class 12 Accountancy Chapter 2)
Here are the step-by-step solutions to the exercise questions from your NCERT textbook. (Note: Question numbers can vary with reprints. These are standard, representative questions.)
Question 1: Anand and Balan are partners sharing profits in the ratio of 3:2. They admit Chander as a partner for 1/4th share in the profits. Calculate the new profit-sharing ratio of the partners.
Step 1: Calculate the remaining share.
Let the total profit of the firm be 1.
Chander's share = 1/4
Remaining share for Anand and Balan = 1 - 1/4 = 3/4
Step 2: Distribute the remaining share.
This remaining share of 3/4 will be shared by Anand and Balan in their old profit-sharing ratio, which is 3:2.
Anand's New Share = (3/4) * (3/5) = 9/20
Balan's New Share = (3/4) * (2/5) = 6/20
Step 3: Determine the new ratio.
Chander's Share = 1/4 = 5/20
Therefore, the New Profit-Sharing Ratio of Anand, Balan, and Chander is 9:6:5.
Let the total profit of the firm be 1.
Chander's share = 1/4
Remaining share for Anand and Balan = 1 - 1/4 = 3/4
Step 2: Distribute the remaining share.
This remaining share of 3/4 will be shared by Anand and Balan in their old profit-sharing ratio, which is 3:2.
Anand's New Share = (3/4) * (3/5) = 9/20
Balan's New Share = (3/4) * (2/5) = 6/20
Step 3: Determine the new ratio.
Chander's Share = 1/4 = 5/20
Therefore, the New Profit-Sharing Ratio of Anand, Balan, and Chander is 9:6:5.
Question 12: A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They decide to admit C into partnership for 1/4 share in profits. C is unable to bring his share of goodwill in cash. The goodwill of the firm is valued at ₹20,000. Give necessary journal entries.
Step 1: Calculate C's share of Goodwill.
C's share in firm's goodwill = ₹20,000 * (1/4) = ₹5,000.
Step 2: Calculate Sacrificing Ratio.
Since no other information is given, the old partners sacrifice in their old profit-sharing ratio, which is 3:2.
Step 3: Pass the Journal Entry.
When the new partner is unable to bring goodwill in cash, we adjust it through their Capital/Current Account. The entry is: *New Partner's Capital A/c Dr. To Sacrificing Partner's Capital A/c*.
Journal Entry
Working Note:
Goodwill distributed to A = ₹5,000 * (3/5) = ₹3,000
Goodwill distributed to B = ₹5,000 * (2/5) = ₹2,000
C's share in firm's goodwill = ₹20,000 * (1/4) = ₹5,000.
Step 2: Calculate Sacrificing Ratio.
Since no other information is given, the old partners sacrifice in their old profit-sharing ratio, which is 3:2.
Step 3: Pass the Journal Entry.
When the new partner is unable to bring goodwill in cash, we adjust it through their Capital/Current Account. The entry is: *New Partner's Capital A/c Dr. To Sacrificing Partner's Capital A/c*.
Journal Entry
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| C's Capital A/c ..........................Dr. | 5,000 | |||
| To A's Capital A/c | 3,000 | |||
| To B's Capital A/c | 2,000 | |||
| (Being C's share of goodwill adjusted through capital accounts of sacrificing partners in their sacrificing ratio of 3:2) |
Working Note:
Goodwill distributed to A = ₹5,000 * (3/5) = ₹3,000
Goodwill distributed to B = ₹5,000 * (2/5) = ₹2,000
Question 20: Leela and Meena are partners in a firm sharing profits and losses in the ratio of 5:3. On Jan 1, 2023 they admitted Om as a new partner. On the date of Om’s admission, the balance sheet of Leela and Meena showed a General Reserve of ₹16,000 and a debit balance of ₹8,000 in the Profit and Loss Account. Record the necessary journal entries.
Logic: General Reserve and P&L balance belong to the old partners and must be distributed in their old profit-sharing ratio (5:3).
Journal Entries
Working Notes:
1. General Reserve: Leela's Share = ₹16,000 * (5/8) = ₹10,000; Meena's Share = ₹16,000 * (3/8) = ₹6,000.
2. Profit & Loss (Debit Balance): Leela's Share = ₹8,000 * (5/8) = ₹5,000 (Debit); Meena's Share = ₹8,000 * (3/8) = ₹3,000 (Debit).
Journal Entries
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Jan 1, 2023 | General Reserve A/c ......................Dr. | 16,000 | ||
| To Leela's Capital A/c | 10,000 | |||
| To Meena's Capital A/c | 6,000 | |||
| (Being General Reserve distributed between old partners in their old ratio of 5:3) | ||||
| Jan 1, 2023 | Leela's Capital A/c ......................Dr. | 5,000 | ||
| Meena's Capital A/c ......................Dr. | 3,000 | |||
| To Profit & Loss A/c | 8,000 | |||
| (Being debit balance of P&L written off to old partners' capital accounts in 5:3 ratio) |
Working Notes:
1. General Reserve: Leela's Share = ₹16,000 * (5/8) = ₹10,000; Meena's Share = ₹16,000 * (3/8) = ₹6,000.
2. Profit & Loss (Debit Balance): Leela's Share = ₹8,000 * (5/8) = ₹5,000 (Debit); Meena's Share = ₹8,000 * (3/8) = ₹3,000 (Debit).
Extra Important Questions (Board Style 2026-27)
Here are some extra questions to test your understanding, designed as per the CBSE Board exam pattern.
Multiple Choice Questions (MCQs)
Q1. The Revaluation Account is a ________ account.
(a) Real
(b) Personal
(c) Nominal
(d) Asset
Correct Answer: (c) Nominal
Explanation: It is prepared to find out the profit or loss from the revaluation of assets and liabilities, which is a nominal characteristic.
Explanation: It is prepared to find out the profit or loss from the revaluation of assets and liabilities, which is a nominal characteristic.
Q2. Sacrificing ratio is calculated at the time of:
(a) Dissolution of the firm
(b) Admission of a partner
(c) Retirement of a partner
(d) All of the above
Correct Answer: (b) Admission of a partner
Explanation: It determines the proportion in which old partners give up their share of profit for the new partner.
Explanation: It determines the proportion in which old partners give up their share of profit for the new partner.
Q3. If the incoming partner brings his share of goodwill in cash, the amount is debited to:
(a) Goodwill Account
(b) Capital Account of the new partner
(c) Cash/Bank Account
(d) Capital Accounts of old partners
Correct Answer: (c) Cash/Bank Account
Explanation: Bringing in cash increases the firm's cash or bank balance, hence it is debited.
Explanation: Bringing in cash increases the firm's cash or bank balance, hence it is debited.
Q4. The balance of the Investment Fluctuation Reserve, after meeting the fall in the value of investment, is transferred to:
(a) Revaluation Account
(b) Partners' Capital Accounts in the old ratio
(c) Partners' Capital Accounts in the new ratio
(d) Goodwill Account
Correct Answer: (b) Partners' Capital Accounts in the old ratio
Explanation: Any excess reserve is a profit that belongs to the old partners.
Explanation: Any excess reserve is a profit that belongs to the old partners.
Q5. Hidden Goodwill is inferred when:
(a) The new partner pays extra cash
(b) The value of the firm is not mentioned
(c) The new partner's capital contribution is disproportionately high for his profit share
(d) The firm has a good reputation
Correct Answer: (c) The new partner's capital contribution is disproportionately high for his profit share
Explanation: The excess capital contributed over the proportionate capital is treated as goodwill.
Explanation: The excess capital contributed over the proportionate capital is treated as goodwill.
Short Answer Questions
Q6. Differentiate between Sacrificing Ratio and Gaining Ratio.
| Basis | Sacrificing Ratio | Gaining Ratio |
|---|---|---|
| Meaning | Ratio in which old partners sacrifice their profit share. | Ratio in which remaining partners gain a profit share. |
| When Calculated | At the time of Admission of a Partner. | At the time of Retirement or Death of a Partner. |
| Formula | Old Ratio - New Ratio | New Ratio - Old Ratio |
Q7. What are the two main rights acquired by a new partner?
A new partner admitted to the firm acquires two main rights:
1. Right to share in the assets of the partnership firm.
2. Right to share in the future profits of the partnership firm.
1. Right to share in the assets of the partnership firm.
2. Right to share in the future profits of the partnership firm.
Q8. Give the journal entry to distribute Workmen Compensation Reserve of ₹50,000 at the time of admission of Z, when there is no claim against it. A and B are old partners sharing profits 3:2.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Workmen Compensation Reserve A/c .....Dr. | 50,000 | |||
| To A's Capital A/c | 30,000 | |||
| To B's Capital A/c | 20,000 | |||
| (Being WCR distributed to old partners in 3:2) |
Long Answer & Case-Based Questions
Q9. (Long Answer - 8 Marks) Ashish and Bimal are partners sharing profits in the ratio 3:2. Their Balance Sheet as at 31st March, 2026 was as follows: Liabilities: Creditors ₹40,000; General Reserve ₹10,000; Capitals: Ashish ₹1,00,000, Bimal ₹80,000. Assets: Cash ₹20,000; Debtors ₹50,000; Stock ₹60,000; Machinery ₹1,00,000. They admit Chintan into partnership on 1st April, 2026, for 1/5th share on the following terms: (i) Chintan brings ₹50,000 as his capital. (ii) Chintan brings ₹10,000 for his share of goodwill. (iii) Machinery is to be depreciated by 10%. (iv) Stock is revalued at ₹70,000. (v) A provision for doubtful debts is to be created at 5% on debtors. Prepare Revaluation Account, Partners’ Capital Accounts, and the new Balance Sheet.
Step 1: Prepare Revaluation Account
Step 2: Prepare Partners' Capital Accounts
Step 3: Prepare the New Balance Sheet
| Dr. | Cr. | ||
|---|---|---|---|
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Machinery A/c | 10,000 | By Stock A/c | 10,000 |
| To Provision for DD A/c | 2,500 | By Loss transferred to: | |
| Ashish's Capital A/c | 1,500 | ||
| Bimal's Capital A/c | 1,000 | ||
| Total | 12,500 | Total | 12,500 |
Step 2: Prepare Partners' Capital Accounts
| Dr. | Cr. | ||||||
|---|---|---|---|---|---|---|---|
| Particulars | Ashish (₹) | Bimal (₹) | Chintan (₹) | Particulars | Ashish (₹) | Bimal (₹) | Chintan (₹) |
| To Revaluation A/c (Loss) | 1,500 | 1,000 | - | By Balance b/d | 1,00,000 | 80,000 | - |
| To Balance c/d | 1,10,500 | 85,000 | 50,000 | By Bank A/c | - | - | 50,000 |
| By General Reserve | 6,000 | 4,000 | - | ||||
| By Premium for Goodwill | 6,000 | 4,000 | - | ||||
| Total | 1,12,000 | 86,000 | 50,000 | Total | 1,12,000 | 86,000 | 50,000 |
Step 3: Prepare the New Balance Sheet
| Liabilities | Assets | ||
|---|---|---|---|
| Amount (₹) | Amount (₹) | ||
| Creditors | 40,000 | Cash at Bank | 80,000 |
| Capitals: | Debtors | 50,000 | |
| Ashish | 1,10,500 | Less: PDD | (2,500) |
| Bimal | 85,000 | 47,500 | |
| Chintan | 50,000 | Stock | 70,000 |
| 2,45,500 | Machinery | 90,000 | |
| Total | 2,85,500 | Total | 2,85,500 |
Q10. (Case-Based) Rohan and Sohan are partners sharing profits 2:1. To expand their successful bakery, they decide to admit Karan for a 1/4th share, which he acquires from Rohan and Sohan in the ratio of 1:1. Karan brings in ₹2,00,000 as capital. The total goodwill of the firm is valued at ₹1,20,000. Based on the above, answer the following:
(i) What is the sacrificing ratio of Rohan and Sohan?
(ii) What is the amount of goodwill Karan has to bring?
(iii) Pass the journal entry for goodwill treatment, assuming Karan brings it in cash.
(i) Sacrificing Ratio: The ratio in which Karan acquires his share is the sacrificing ratio. Therefore, the sacrificing ratio of Rohan:Sohan is 1:1.
(ii) Karan's Share of Goodwill: Karan's share = 1/4 of total goodwill = 1/4 * ₹1,20,000 = ₹30,000.
(iii) Journal Entry for Goodwill:
(ii) Karan's Share of Goodwill: Karan's share = 1/4 of total goodwill = 1/4 * ₹1,20,000 = ₹30,000.
(iii) Journal Entry for Goodwill:
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Bank A/c .....................................Dr. | 30,000 | |||
| To Premium for Goodwill A/c | 30,000 | |||
| (Being goodwill brought by Karan) | ||||
| Premium for Goodwill A/c ...................Dr. | 30,000 | |||
| To Rohan's Capital A/c | 15,000 | |||
| To Sohan's Capital A/c | 15,000 | |||
| (Being goodwill distributed in sacrificing ratio 1:1) |
Common Mistakes Students Make
- Confusing Ratios: Students often mix up the Sacrificing Ratio with the Old or New Ratio. Tip: Always calculate the sacrificing ratio separately (Old - New) unless it's explicitly given.
- Incorrect Goodwill Treatment: Remember the golden rules:
- If brought in cash & retained: Bank A/c Dr. to Premium; Premium Dr. to Sacrificing Partners.
- If not brought in cash: New Partner's Current/Capital A/c Dr. to Sacrificing Partners.
- Forgetting to Distribute Reserves: Always distribute General Reserve, P&L Balance, etc., to OLD partners in the OLD ratio before making any other adjustments.
- Errors in Revaluation Account: A very common mistake is debiting an increase in an asset or crediting a decrease. Remember: Debit all expenses/losses (decrease in asset value); Credit all incomes/gains (increase in asset value).
- Capital Account Errors: Forgetting to post an item from the Revaluation account or not crediting the goodwill share can lead to an incorrect final balance. Be systematic.
Exam Preparation Tips
- Master the Formats: Practice drawing the formats for Revaluation A/c, Partners' Capital A/c, and the Balance Sheet until they become second nature.
- Focus on Comprehensive Questions: Admission is usually tested as a long 6 or 8-mark question. Practice at least 10-15 full problems that require preparing all accounts.
- Time Management: In the exam, a full question on Admission should not take more than 20-25 minutes. Time your practice sessions.
- Revise Journal Entries: Create a cheat sheet for all important journal entries, especially for Goodwill under different scenarios.
- Last-Minute Revision: A day before the exam, quickly revise the formulas for ratios and the rules for the Revaluation Account.
Frequently Asked Questions (FAQs)
Q1. What is the formula for calculating Sacrificing Ratio in admission of a partner?
The formula is Sacrificing Ratio = Old Profit-Sharing Ratio – New Profit-Sharing Ratio. It is calculated for the old partners to determine how much of their profit share they are giving up for the new partner.
Q2. How is Goodwill treated on the admission of a new partner for CBSE Class 12?
The new partner must compensate the old partners for their sacrifice. This is done by bringing in a "Premium for Goodwill." This premium is then distributed among the old partners in their sacrificing ratio.
Q3. Why do we prepare a Revaluation Account on admission?
A Revaluation Account is prepared to ascertain the profit or loss arising from the revaluation of assets and reassessment of liabilities. This ensures that the new partner does not benefit from past appreciations or suffer from past reductions in value.
Q4. What is the difference between General Reserve and Workmen Compensation Reserve?
General Reserve is a free reserve, always distributed among old partners. Workmen Compensation Reserve is a specific reserve created for potential claims from employees. If there is a claim, that amount is set aside, and only the excess reserve is distributed.
Q5. Where can I find the best Updated NCERT Solutions for Class 12 Accountancy?
This article provides detailed, step-by-step solutions, important questions, and exam tips, making it a one-stop resource for Class 12 Accountancy Chapter 2. Bookmark this page for your preparation!
Conclusion: Admission of a Partner is a cornerstone chapter in partnership accounting. By understanding the logic behind each step—from calculating ratios to preparing the final Balance Sheet—you can tackle any question with confidence. Remember, the key to success is consistent practice. Solve as many problems as you can, revise the concepts regularly, and analyze past year question papers (PYQs) to understand the exam pattern. Happy learning!
More Class 12 Accountancy Chapters
Part A Ch 1: Accounting for Partnership – Basic Concepts
Part A Ch 2: Reconstitution – Admission of a Partner
Part A Ch 3: Reconstitution – Retirement/Death of a Partner
Part A Ch 4: Dissolution of Partnership Firm
Part B Ch 1: Accounting for Share Capital
Part B Ch 2: Issue & Redemption of Debentures
Part B Ch 3: Financial Statements of a Company
Part B Ch 4: Analysis of Financial Statements
Part B Ch 5: Accounting Ratios
Part B Ch 6: Cash Flow Statement
All Subjects Dashboard
More Class 12 Business Studies Chapters
Ch 1: Nature & Significance of Management
Ch 2: Principles of Management
Ch 3: Business Environment
Ch 4: Planning
Ch 5: Organising
Ch 6: Staffing
Ch 7: Directing
Ch 8: Controlling
Ch 9: Financial Management
Ch 10: Financial Markets
Ch 11: Marketing Management
Ch 12: Consumer Protection
All Subjects Dashboard
More Class 12 Macro Economics Chapters
Ch 1: Introduction to Macroeconomics
Ch 2: National Income
Ch 3: Money and Banking
Ch 4: Determination of Income & Employment
Ch 5: Government Budget
Ch 6: Balance of Payments & Foreign Exchange
More Class 12 Indian Economics Chapters
Ch 1: Indian Economy on the Eve of Independence
Ch 2: Indian Economy 1950-1990
Ch 3: Liberalisation, Privatisation and Globalisation
Ch 4: Human Capital Formation
Ch 5: Rural Development
Ch 7: Environment and Sustainable Development
Ch 8: Comparative Development Experiences of India and its Neighbours