Learning Materials For Accounting, Management , Finance And Economics.

Sunday, November 27, 2011

Concept And Meaning Of Admission Of New Partner

Partnership by its name meant that it is an association of partners to endeavor a venture for getting reward in the form of profit in the days to come. During the ordinary course of business the partnership business may need additional capital, special skill, a namely attachment to enhance the goodwill from other party to smoothly run in the competitive business environment. When because of the same reasons, or for some other importances if a partnership welcomes outsiders as a partner in the business it is called as admission of a partner. Before giving admittance to new partner there should be a clear-cut consent between or among the partner for the same otherwise it may cause a reason of dissolution of partnership.

During the time of admittance of new partner, a partnership firm will have a due exercise on the following important aspects:

1. Impact of admittance in the profit sharing ratio of the firm

2. Impact of admittance in the revaluation of assets and liabilities of the firm

3. Impact of admittance in the value of goodwill of the firm

4. Rearrangement of reserves and surplus and accumulated losses of the firm

5. Adjustment of life insurance policy of partners

6. Re-adjustment of partners capital giving due influence of new admittance

7. Guarantee of minimum profit to a partner

8. Reservation of old profits to the old partners

9. Admission of a partner during an accounting year.