Revaluation account will be credited

Revaluation account will be credited

According to section 31 (1) of the Indian partnership Act 1932, a person can be admitted only with the consent of all the existing partners. A person who is admitted to the firm is known as an incoming or a new partner.

A person may join as a new partner in an existing partnership firm. This is called admission of a partner.

Old ratio of Praveena and Dhanya = 7:3 that is \(\frac{7}{10}:\frac{3}{10}\)
New ratio of Paveena, Dhanya and Malini = 5:2:3 that is, \(\frac{5}{10};\frac{2}{10};\frac{3}{10}\)
Share sacrificed = Old share - New share
Praveena \(=\frac { 7 }{ 10 } -\frac { 5 }{ 10 } =\frac { 7-5 }{ 10 } =\frac { 2 }{ 10 } \)
Dhanya \(=\frac { 3 }{ 10 } -\frac { 2 }{ 10 } =\frac { 3-2 }{ 10 } =\frac { 1 }{ 10 } \)
Sacrificing ratio ofPraveena and Dhanya is \(\frac { 2 }{ 10 } :\frac { 1 }{ 10 } \) that is 2:1

Computation of sacrificing ratio and new profit sharing ratio
Old share = 5:3 that is prema \(\frac{5}{8}\) amd Chandra \(\frac{3}{8}\)
Share scarified =Old share x Proportion of share sacrificed
Prema \(=\frac { 5 }{ 8 } \times \frac { 1 }{ 8 } =\frac { 5 }{ 64 } \)
Chandra \(=\frac { 3 }{ 8 } \times \frac { 1 }{ 8 } =\frac { 3 }{ 64 } \)
Sacrificing ratio of Prema and Chandra is \(\frac{5}{64}\)and \(\frac{3}{64}\) that is 5:3
New share = Old share - Share sacrificed
Prema \(=\frac { 5 }{ 8 } -\frac { 5 }{ 64 } =\frac { 40-5 }{ 64 } =\frac { 35 }{ 64 } \)
Chandra \(=\frac { 3 }{ 8 } -\frac { 3 }{ 64 } =\frac { 24-3 }{ 64 } =\frac { 21 }{ 64 } \)
Share of new partner = Sum of shares sacrificed by Prema and Chandra
Hema \(=\frac { 5 }{ 24 } +\frac { 3 }{ 64 } =\frac { 5+3 }{ 64 } =\frac { 8 }{ 64 } \)
New profit sharing ratio of Prema, Chandra and Hema \(=\frac { 35 }{ 64 } :\frac { 21 }{ 64 } :\frac { 8 }{ 64 } \), that is 35:21:8

Computation of sacrificing ratio and new profit sharing ratio
Share sacrificed by old partners 
Ananth = \(\frac{1}{5}\)
Suman = 0
Sacrificing ratio = 1 : 0
Old profit of Ananth and Suman is 3 : 2 that is \(\frac { 3 }{ 5 } :\frac { 2 }{ 5 } \)
New share of old partner = Old share - Share sacrificed
Ananth \(=\frac { 3 }{ 5 } -\frac { 1 }{ 5 } =\frac { 3-1 }{ 5 } =\frac { 2 }{ 5 } \)
Suman = \(\frac { 2 }{ 5 } \)
Share of new partner Saran = \(\frac { 1 }{ 5 } \)
New profit sharing ratio of Ananth, Suman and saran is \(\frac { 2 }{ 5 } :\frac { 2 }{ 5 } :\frac { 1 }{ 5 } \) that is 2:2:1

Sacrificing ratio is the proportion of the profit which is sacrificed or foregone by the old partners in favour of the new partner. The purpose of finding the sacrificing ratio is to share the goodwill brought in by the new partner. 
Share sacrificed = Old share - New share
Sacrificing ratio = Ratio of share sacrificed by the old partners

Profits and losses of previous years which are not distributed to the partners are called accumulated profit and losses. Any reserve and accumulated profits and losses belong to the oldpartners and hence these should be distributed to the old partners in the old profit sharing ratio.

Computation of sacrificing ratio and new profit sharing ratio
Old ratio of Anil, Sunil and Hari = 4 : 3 : 3 or \(\frac { 4 }{ 10 } :\frac { 3 }{ 10 } :\frac { 3 }{ 10 } \)
Raja’s share of profit = 20% or 20/100 or 1/5
Let the total share be 1
Remaining share =  \(1-\frac { 1 }{ 5 } =\frac { 5-1 }{ 5 } \)
= \(\frac { 4 }{ 5 } \)
New share of old partners = Remaining share × Old share
Anil = \(\frac { 4 }{ 5 } \times \frac { 1 }{ 10 } =\frac { 16 }{ 50 } \)
Sunil = \(\frac { 4 }{ 5 } \times \frac { 3 }{ 10 } =\frac { 12 }{ 50 } \)
Hari =  \(\frac { 4 }{ 5 } \times \frac { 3 }{ 10 } =\frac { 12 }{ 50 } \)
Share of new partner Raja =  \(\frac { 1 }{ 5 } \)
In order to equalise the denominator, multiply and divide Raja’s share by 10
Raja’s share = \(\frac { 1 }{ 5 } \times \frac { 10 }{ 10 } =\frac { 10 }{ 50 } \)
New profit sharing ratio of Anil, Sunil, Hari and Raja = \(\frac { 16 }{ 50 } :\frac { 12 }{ 50 } :\frac { 12 }{ 50 } :\frac { 12 }{ 50 } \) that is, 8 : 6 : 6 : 5.

Computation of sacrificing ratio and new profit sharing ratio
Arun’s share = \(\frac { 1 }{ 4 } \)
Proportion of share sacrificed = 1:1(equally) i.e. \(\frac { 1 }{ 2 } :\frac { 1 }{ 2 } \)
Share sacrificed = New partner’s share × Proportion of share sacrificed
Mahesh = \(\frac { 1 }{ 4 } \times \frac { 1 }{ 2 } =\frac { 1 }{ 8 } \)
Dhanush = \(\frac { 1 }{ 4 } \times \frac { 1 }{ 2 } =\frac { 1 }{ 8 } \)
Sacrificing ratio of Mahesh and Dhanush is \(\frac { 1 }{ 8 } :\frac { 1 }{ 8 } \) that is, 1:1
New share of old partner = Old share - Share sacrificed
Mahesh = \(\frac { 2 }{ 3 } -\frac { 1 }{ 8 } =\frac { 16-3 }{ 24 } =\frac { 13 }{ 24 } \)
Dhanush = \(\frac { 1 }{ 3 } -\frac { 1 }{ 8 } =\frac { 8-3 }{ 24 } =\frac { 5 }{ 24 } \)
Share of new partner Arun = \(\frac { 1 }{ 4 } \)
In order to equate, multiply and divide Arun’s share by 6
= \(\frac { 1 }{ 4 } \times \frac { 6 }{ 6 } =\frac { 6 }{ 24 } \)
New profit sharing ratio of Mahesh, Dhanush and Arun = \(\frac { 13 }{ 24 } :\frac { 5 }{ 24 } :\frac { 6 }{ 24 } \)that is, 13:5:6.

Computation of sacrificing ratio and new profit sharing ratio
Old share = 3:2 that is, Prasanth \(\frac { 3 }{ 5 } \) and Nisha \(\frac { 2 }{ 5 } \)
Share sacrificed = Old share × Proportion of share sacrificed
Prasanth = \(\frac { 3 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 6 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 4 }{ 25 } \)
Sacrificing ratio of Prasanth and Nisha is \(\frac { 6 }{ 25 } \) and \(\frac { 4 }{ 25 } \), that is, 3:2
New share = Old share - Share sacrificed
Prasanth = \(\frac { 3 }{ 5 } -\frac { 6 }{ 25 } =\frac { 15-6 }{ 25 } =\frac { 9 }{ 25 } \)
Nisha = \(\frac { 2 }{ 5 } -\frac { 4 }{ 25 } =\frac { 10-4 }{ 25 } =\frac { 6 }{ 25 } \)
Share of new partner = Sum of shares sacrificed by Prasanth and Nisha
Ramya = \(\frac { 6 }{ 25 } +\frac { 4 }{ 25 } =\frac { 6+4 }{ 25 } =\frac { 10 }{ 25 } \)
New profit sharing ratio of Prasanth, Nisha and Ramya = \(\frac { 9 }{ 25 } :\frac { 6 }{ 25 } :\frac { 10 }{ 25 } \) that is, 9:6:10

Computation of sacrificing ratio and new profit sharing ratio
Old share = 3:2 that is, Suresh \(\frac { 3 }{ 5 } \) and Dinesh \(\frac{2}{5}\) \(Suresh\)
Share sacrificed = Old share x Proportion of share sacrificed
Suresh = \(\frac { 3 }{ 5 } \times \frac { 1 }{ 5 } =\frac { 3 }{ 25 } \)
Dinesh = \(\frac { 2 }{ 5 } \times \frac { 2 }{ 5 } =\frac { 4 }{ 25 } \)
Sacrificing ratio of Suresh and Dinesh is \(\frac { 3 }{ 25 } \) and \(\frac { 4 }{ 25 } \) that is, 3:4
New share = Old share - Share sacrificed
Suresh = \(\frac { 3 }{ 5 } -\frac { 3 }{ 25 } =\frac { 15-3 }{ 25 } =\frac { 12 }{ 25 } \)
Dinesh = \(\frac { 2 }{ 5 } -\frac { 4 }{ 25 } =\frac { 10-4 }{ 25 } =\frac { 6 }{ 25 } \)
Share of new partner = Sum of shares sacrificed by Suresh and Dinesh
Ramesh = \(\frac { 3 }{ 25 } +\frac { 4 }{ 25 } =\frac { 3+4 }{ 25 } =\frac { 7 }{ 25 } \)
New profit sharing ratio of Suresh, Dinesh and Ramesh = \(\frac { 12 }{ 25 } :\frac { 6 }{ 25 } :\frac { 7 }{ 25 } \)that is, 12:6:7.

Computation of sacrificing ratio and new profit sharing ratio
Shares sacrificed = \(\frac { 2 }{ 7 } ,\frac { 1 }{ 7 } \)
Sacrificing ratio of Ravi and Kumar is 2:1
Old profit sharing ratio = 7:3 or \(\frac { 7 }{ 10 } :\frac { 3 }{ 10 } \)
New share of old partners = Old share - Share sacrificed
Ravi = \(\frac { 7 }{ 10 } -\frac { 2 }{ 7 } =\frac { 49-20 }{ 70 } =\frac { 29 }{ 70 } \)
Kumar = \(\frac { 3 }{ 10 } -\frac { 1 }{ 7 } =\frac { 21-10 }{ 70 } =\frac { 11 }{ 70 } \)
Share of new partner Christy = \(\frac { 3 }{ 7 } \)
In order to equate the denominator of Christy’s share, multiply and divide by 10
= \(\frac { 3 }{ 7 } \times \frac { 10 }{ 10 } =\frac { 30 }{ 70 } \)
New profit sharing ratio of Ravi, Kumar and Christy = \(\frac { 29 }{ 70 } :\frac { 11 }{ 70 } :\frac { 30 }{ 70 } \) = 29:11:30

Journal entry

Date	Particulars	L.E.	Debit Rs.	Credit Rs.
2017	Reserve fund A/c Dr.		50,000
March 31	To Mala’s capital A/c (50,000 \(\times\) 3/5)			30,000
	To Vimala’s capital A/c (50,000 \(\times\) 2/5) (Reserve fund transferred to old partners’ capital account in the old profit sharing ratio)			20,000