Revaluation account will be credited

Revaluation account will be credited

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.

Calculation of sacrificing ratio
Sacrificing ratio = Old share – New share
Aravind = \(\frac { 3 }{ 5 } -\frac { 1 }{ 3 } =\frac { 9-5 }{ 15 } =\frac { 4 }{ 15 } \)
Balaji = \(\frac { 2 }{ 5 } -\frac { 1 }{ 3 } =\frac { 6-5 }{ 15 } =\frac { 1 }{ 15 } \)
Therefore, sacrificing ratio is 4:1

Computation of sacrificing ratio and new profit sharing ratio:
Since share sacrificed, proportion of share sacrificed and new profit sharing ratio are not given, it is assumed that the existing partners sacrifice in their old profit sharing ratio, that is, 2:1. Sacrificing ratio of Vimal and Athi is 2:1
Let the total share be 1
Jeyam’s share = \(\frac { 1 }{ 4 } \)
Remaining share =  \(1-\frac { 1 }{ 4 } =\frac { 4-1 }{ 4 } \)
= \(\frac { 3 }{ 4 } \)
New share of old partners = Remaining share × Old share
Vimal = \(\frac { 3 }{ 4 } \times \frac { 2 }{ 3 } =\frac { 6 }{ 12 } \)
Athi = \(\frac { 3 }{ 4 } \times \frac { 1 }{ 3 } =\frac { 3 }{ 12 } \)
Share of new partner Jeyam = \(\frac { 1 }{ 4 } \)
In order to equalise the denominator, multiply and divide by 3
Jeyam’s share = \(\frac { 1 }{ 4 } \times \frac { 3 }{ 3 } =\frac { 3 }{ 12 } \)
New profit sharing ratio of Vimal,  Athi and Jeyam = \(\frac { 6 }{ 12 } :\frac { 3 }{ 12 } :\frac { 3 }{ 12 } \) that is, 2 : 1 : 1.

Computation of sacrificing ratio and new profit sharing ratio
Ranjan’s share = \(\frac { 1 }{ 4 } \)
Old ratio=2:1 that is, \(\frac { 2 }{ 3 } :\frac { 1 }{ 3 } \)
Proportion of share sacrificed = 3:2 that is, \(\frac { 3 }{ 5 } :\frac { 2 }{ 5 } \)
Share sacrificed = New partner’s share × Proportion of share sacrificed
Ramesh = \(\frac { 1 }{ 4 } \times \frac { 3 }{ 5 } =\frac { 3 }{ 20 } \)
Raju = \(\frac { 1 }{ 4 } \times \frac { 2 }{ 5 } =\frac { 2 }{ 20 } \)
Sacrificing ratio of Ramesh and Raju is \(\frac { 3 }{ 20 } \) and \(\frac { 2 }{ 20 } \), that is, 3:2
New share of old partner = Old share - Share sacrificed
Ramesh = \(\frac { 2 }{ 3 } -\frac { 3 }{ 20 } =\frac { 40-9 }{ 60 } =\frac { 31 }{ 60 } \)
Raju = \(\frac { 1 }{ 3 } -\frac { 2 }{ 20 } =\frac { 20-6 }{ 60 } =\frac { 14 }{ 60 } \)
Share of new partner Ranjan = \(\frac { 1 }{ 4 } \)
In order to equate the denominator, multiply and divide Ranjan’s share by 15
= \(\frac { 1 }{ 4 } \times \frac { 15 }{ 15 } =\frac { 15 }{ 60 } \)
Thus, the new profit sharing ratio = \(\frac { 31 }{ 60 } :\frac { 14 }{ 60 } :\frac { 15 }{ 60 } \) = 31 : 14 : 15

                              Eswari         :  Ranikumari   : Chitra
Old ratio    =            7                :          5              :      -
Old share  =           \(\frac{7}{12}\)          :       \(\frac{5}{12}\)         :    -
Surrender =       \(\frac { 7 }{ 12 } \times \frac { 1 }{ 7 } \)     :       \(\frac { 5 }{ 12 } \times \frac { 1 }{ 5 } \)   :    -
               =      \(\frac{1}{12}\)                :           \(\frac{1}{12}\)        :    -
New ratio= Old share - Surrender
                =      \(\frac { 7 }{ 12 } -\frac { 1 }{ 12 } \)    :       \(\frac { 5 }{ 12 } -\frac { 1 }{ 5 } \)  :    -
                =       \(\frac{6}{12}\)           :        \(\frac{4}{12}\)       :    \(\frac{2}{12}\)
                =       6             :         4        :     2
New ratio = 3 : 2 : 1
Sacrificing ratio = 1 : 1

According treatment for goodwill on admission of a partner is discussed below:
i) When new partner brings cash onwards goodwill
When the new partner brings cash towards goodwill in addition to the amount of capital it is distributed to the existing partners in the sacrificing ratio.
(ii) When the new partner does not bring goodwill in cash or in kind
If the new partner does not bring goodwill in cash or in kind, his share of goodwill must be adjusted through the capital accounts of the partners.
(iii) When the new partner brings only a part of the goodwill in cash or in kind
Sometimes the new partner may bring only a part of the goodwill in cash or assets. In such a case, for the cash or the assets brought the respective account is debited and for the amount not brought in cash or kind, the new partner's capital account is debited
(iv) Existing goodwill
If goodwill already appears in the books of accounts at the time of admission if the partners decide, it can be written off by transferring it to the existing partner's capital account/current account in the old profit sharing ratio.

The following adjustment are necessary at the time of admission of a partner
(i) Distribution of accumulated profits, reserves and losses.
(ii) Revaluation of assets and liabilities
(iii) Determination of new profit sharing ratio and sacrificing ratio
(iv) Adjustment for goodwill
(v) Adjustment of capital on the basis of new profit sharing ratio (if so agreed).