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Admission Of A New Partner Accounts
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Admission Of A New Partner Accounts

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  • 1. Admission of a new Partner (Higher Only) Mr Arthur
  • 2. Aims of the Lesson
    • Intro to Admission of a new partner
    • Goodwill
    • Steps in admitting a new partner
  • 3. Admission of new Partner
    • Partnerships may admit a new partner for the following reasons:
      • Raise more capital
      • Death of a partner
      • Increase specialism is partnership
  • 4. Goodwill
    • Goodwill is an intangible asset which may arise from the reputation of the business
      • Value from:
        • Company reputation
        • Customer loyalty
        • Trade marks etc
    • When a new partner joins you may need to calculate the value of goodwill, share it among existing partner’s Capital accounts
    • Goodwill may equal several years average operating profits
  • 5. Steps in Admitting New Partner
    • Revalue Assets and prepare a table showing changes
    • Add profit or loss from revaluation of assets to partners Capital Accounts
    • Calculate existing partner’s share of Goodwill
    • Prepare Capital accounts of all partners
    • Write off Goodwill against all partners
    • Calculate new profit sharing ratio