Question

When a new partner is admitted to an existing partnership, whether by contributing cash, property, or expertise, an adjustment of the accounts of the partnership to current value should be made (if necessary). Any such adjustment should be made to the capital accounts of

the existing partners (only) in their income/loss sharing ratio.

the existing partners (only) in the ratio of their beginning-of-period capital accounts.

the existing partners AND the new partner in their income/loss sharing ratio.

the existing partners AND the new partner in the ratio of their beginning-of-period capital accounts.

Answer 1

Ans is A the existing partners (only) in their income/loss sharing ratio.

Explanation: on admission of a new partner assets and liabilities of firm are brings in at their current value and any unrecorded liabilities and assets are recorded in books, this is done by preparing a revaluation account. For each increase in assets or decrease in liabilities revaluation account is credited and vice versa and if there is net credit balance then it’s a net gain and its transferred to old partners capital accounts in their old profit sharing ratio.