Admission of a partner is the chapter where Class 12 Accountancy stops being about one firm and starts being about change. A new partner joins, and suddenly you’re working out a new profit-sharing ratio, compensating the old partners for goodwill, revaluing the assets and adjusting every capital account — usually inside a single 6-mark question.
This admission of a partner Class 12 guide takes you through it step by step: the sacrificing ratio, goodwill treatment, the revaluation account, reserves, and a fully solved problem with journal entries and the new balance sheet.
Why This Chapter Matters
Accounting for Partnership Firms carries 36 of the 80 theory marks in CBSE Class 12 Accountancy, and admission is one of its most heavily tested topics. In the 2026-27 Accountancy sample paper, admission appears in two 1-mark MCQs (on revaluation and adjusted capital) and in a 6-mark question that asks for journal entries and the reconstituted balance sheet. The same ideas — goodwill, revaluation, reserves — come back again in retirement, death and change in profit-sharing ratio.
Master admission, and the rest of the reconstitution chapters become variations on a pattern you already know. Keep the Class 12 NCERT Solutions open to practise the textbook questions as you go.
The Five Adjustments on Admission
Every admission question, however long, is built from the same five adjustments. Work through them in this order:
- 1. New and sacrificing ratio — who gives up how much of their share to the new partner.
- 2. Goodwill — compensating the old partners for the share of profits they give up.
- 3. Revaluation of assets and liabilities — bringing book values up to date before the new partner joins.
- 4. Reserves and accumulated profits or losses — distributing what the old partners built up before admission.
- 5. Capital adjustment — if the question asks for capitals in the new ratio.
Step 1: New Ratio and Sacrificing Ratio
The sacrificing ratio is the ratio in which the old partners give up their share in favour of the new partner. For each old partner, sacrifice = old share − new share. It matters because goodwill brought in by the new partner is shared in this ratio — not the old ratio.
| Situation in the question | Sacrificing ratio |
|---|---|
| Nothing said about how the new partner’s share is taken | Same as the old ratio |
| New partner takes his share equally from old partners | Equal |
| New partner takes a specific fraction from each partner | The ratio of those fractions |
| The new ratio of all partners is given | Old share − new share, for each partner |
For example, A and B share profits 3:2, and C is admitted for 1/4, taking 1/5 from A and 1/20 from B. A’s new share is 3/5 − 1/5 = 8/20, B’s is 2/5 − 1/20 = 7/20, and C’s is 5/20. The new ratio is 8:7:5, and the sacrificing ratio is 1/5 : 1/20 = 4:1 — not 3:2.
Step 2: Treatment of Goodwill
The new partner pays the old partners for the share of future profits they give up. Under the premium method used in NCERT, goodwill is not raised in the books; the new partner’s share of goodwill is credited to the sacrificing partners.
| Case | Journal entry |
|---|---|
| New partner brings goodwill in cash | Cash/Bank A/c Dr. → Premium for Goodwill A/c Premium for Goodwill A/c Dr. → Sacrificing Partners’ Capital A/cs (sacrificing ratio) |
| New partner does not bring goodwill in cash | New Partner’s Current A/c Dr. → Sacrificing Partners’ Capital A/cs (sacrificing ratio) |
| Goodwill brought in kind (assets) | Asset A/c Dr. → Premium for Goodwill A/c (then distributed as above) |
| Goodwill already in the books | Old Partners’ Capital A/cs Dr. (old ratio) → Goodwill A/c (written off) |
Hidden goodwill: sometimes the question doesn’t state goodwill. If the new partner pays more capital than his share of the firm’s adjusted net worth, the difference is hidden goodwill. Work out the firm’s total capital from the new partner’s contribution, subtract the actual combined capital, and treat the result as goodwill.
Step 3: The Revaluation Account
Assets and liabilities are revalued so the new partner doesn’t share gains or losses that arose before he joined. The revaluation account is a nominal account, so remember the rule:
- Debit side: decreases in assets, increases in liabilities, unrecorded liabilities, new provisions.
- Credit side: increases in assets, decreases in liabilities, unrecorded assets.
- Balance: profit or loss on revaluation goes to the old partners in the old ratio. The new partner never shares it.
Step 4: Reserves and Accumulated Profits
General Reserve, Profit and Loss (credit balance) and similar accumulated profits belong to the old partners, so they’re transferred to the old partners’ capital accounts in the old ratio. An accumulated loss, such as a debit balance in Profit and Loss, is written off the same way. Special reserves like the Workmen Compensation Reserve need extra care: only the excess over the actual liability is distributed.
Solved Problem: Admission of a Partner
Question: A and B share profits in the ratio 3:2. Their Balance Sheet on 31 March 2026 showed: Creditors ₹60,000; General Reserve ₹25,000; Capitals — A ₹1,50,000, B ₹1,00,000; Cash ₹35,000; Debtors ₹60,000; Stock ₹50,000; Machinery ₹90,000; Building ₹1,00,000 (total ₹3,35,000).
On 1 April 2026, C is admitted for a 1/4 share, which he takes 1/5 from A and 1/20 from B. C brings ₹1,00,000 as capital and his share of goodwill in cash. The firm’s goodwill is valued at ₹80,000. Building is appreciated by 20%, stock is reduced by 10%, and a provision for doubtful debts of 5% is created on debtors.
Working Notes
- New ratio: A = 3/5 − 1/5 = 8/20; B = 2/5 − 1/20 = 7/20; C = 5/20. New ratio 8:7:5. Sacrificing ratio 4:1.
- Goodwill: C’s share = ₹80,000 × 1/4 = ₹20,000, credited to A ₹16,000 and B ₹4,000 (4:1).
- Revaluation: Building +₹20,000; Stock −₹5,000; Provision −₹3,000 (5% of ₹60,000). Profit ₹12,000, shared A ₹7,200 and B ₹4,800 (3:2).
- General Reserve: ₹25,000 to A ₹15,000 and B ₹10,000 (3:2).
Journal Entries
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Cash A/c Dr. To C’s Capital A/c To Premium for Goodwill A/c (C brought capital and goodwill) | 1,20,000 | 1,00,000 20,000 |
| Premium for Goodwill A/c Dr. To A’s Capital A/c To B’s Capital A/c (Goodwill shared in sacrificing ratio 4:1) | 20,000 | 16,000 4,000 |
| Building A/c Dr. To Revaluation A/c (Building appreciated by 20%) | 20,000 | 20,000 |
| Revaluation A/c Dr. To Stock A/c To Provision for Doubtful Debts A/c (Stock reduced; provision created) | 8,000 | 5,000 3,000 |
| Revaluation A/c Dr. To A’s Capital A/c To B’s Capital A/c (Revaluation profit in old ratio 3:2) | 12,000 | 7,200 4,800 |
| General Reserve A/c Dr. To A’s Capital A/c To B’s Capital A/c (Reserve distributed in old ratio 3:2) | 25,000 | 15,000 10,000 |
Capital Accounts and New Balance Sheet
A’s capital = 1,50,000 + 16,000 + 7,200 + 15,000 = ₹1,88,200. B’s capital = 1,00,000 + 4,000 + 4,800 + 10,000 = ₹1,18,800. C’s capital = ₹1,00,000.
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Creditors | 60,000 | Cash (35,000 + 1,20,000) | 1,55,000 |
| Capitals: A | 1,88,200 | Debtors 60,000 less provision 3,000 | 57,000 |
| Capitals: B | 1,18,800 | Stock | 45,000 |
| Capitals: C | 1,00,000 | Machinery | 90,000 |
| Building | 1,20,000 | ||
| Total | 4,67,000 | Total | 4,67,000 |
The totals match, which is your quickest check that every adjustment has been posted. In the exam, show the Revaluation Account and Partners’ Capital Accounts in full ledger format as well — they carry separate marks.
Common Mistakes That Cost Marks
- Sharing goodwill in the old ratio. Goodwill brought by the new partner goes in the sacrificing ratio. They’re only the same when the question doesn’t say otherwise.
- Giving the new partner a share of revaluation profit or reserves. Both belong to the old partners only.
- Calculating provision on the wrong figure. Read whether the provision is on the book value of debtors or on debtors after bad debts are written off.
- Raising goodwill in the books. Under the premium method, don’t open a Goodwill account for the new partner’s share.
- Skipping narrations. Every journal entry needs one. A short line in brackets is enough.
How to Practise This Chapter
Solve one full admission question every two or three days, always in the same order: ratios, goodwill, revaluation, reserves, capitals, balance sheet. Accountancy formats need to become automatic, and that only happens with written practice. Our 6-week pre-board revision plan shows where these blocks fit, and the Pomodoro vs time blocking guide helps when long ledger questions drain your focus.
For extra variations on ratios and goodwill, use the prompts in how to use AI to make practice questions — and check every AI answer key against your own working, since AI often slips on ratio fractions. Commerce students taking CUET can reuse this practice too: see our CUET 2027 preparation guide. For your other commerce subjects, the Business Studies and Economics NCERT Solutions follow the same chapter order as your textbooks.
Frequently Asked Questions
It is the ratio in which the old partners give up their share of profit to the new partner. For each old partner, sacrifice equals old share minus new share. If the question says nothing about how the new partner’s share is taken, the sacrificing ratio is the same as the old ratio.
Only the old partners, in their old profit-sharing ratio. The changes in asset and liability values happened before the new partner joined, so he does not share them.
Debit the new partner’s current account (or capital account, if the question says so) and credit the sacrificing partners’ capital accounts in the sacrificing ratio. Goodwill is not raised in the books.
Final Takeaway
Admission of a partner looks long, but it’s always the same five adjustments in the same order. Get the sacrificing ratio right, send goodwill to the sacrificing partners, keep revaluation and reserves with the old partners, and check that your balance sheet totals match.
Download the calculator, cheat sheet and practice problems above, and keep NCERT Solutions, Revision Notes and Study Material bookmarked for the rest of the partnership chapters.
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