Accounting · Partnership and LLP Accounts

Admission of a Partner (CA Foundation Accounting)

Updated 1 October 2026

Admission of a partner means the firm is reconstituted with a new partner. You find the new profit sharing ratio and the sacrificing ratio, bring in goodwill, revalue assets and liabilities, adjust reserves and capitals, and pass entries for each. Solve it in a fixed order so no step is missed.

Understand Admission of a Partner

When a new partner joins, the old firm is treated as reconstituted. The old partnership ends and a new one starts. So the old partners' rights in profits, reserves and unrecorded value must be settled fairly before the newcomer shares in them.

The new partner gets a share of future profits. That share comes from the old partners, so their shares fall. The share each old partner gives up is the sacrificing ratio. Unless the question says otherwise, the old partners sacrifice in their old ratio.

The new partner also buys a share in the firm's goodwill, the extra earning power of the firm. The new partner pays for it, in cash or by an adjustment, and the old partners receive it in their sacrificing ratio. Goodwill is paid for because the old partners built it up.

Assets and liabilities may be shown at wrong values. They are revalued through the Revaluation Account, and the profit or loss goes to the old partners in their old ratio. Accumulated profits, reserves and losses on the balance sheet also belong to the old partners, so they are credited or debited to them in the old ratio.

Finally, capitals may need adjusting. The new partner may bring capital in proportion to the share, or the old partners' capitals may be made to match the new ratio.

Key rules to remember

Sacrificing ratio: Sacrificing share = Old share − New share (for each old partner); If not given, the old partners sacrifice in their old ratio. Compute for each old partner and compare.
New partner's share (sacrifice from old partners): New partner's share = Share given up by old partners together; Sum of the sacrifices must equal the new partner's share.
Goodwill of the firm from the new partner's premium: Total goodwill = New partner's goodwill ÷ New partner's share; Use when the premium is given and the firm's goodwill must be inferred.
Hidden goodwill: Total capital of the firm = New partner's capital ÷ his share; Goodwill = Total capital − (Old capitals + New capital); Compare total implied capital with actual capital contributed. Adjust for revaluation and reserves where relevant.
Goodwill entry when premium is brought in cash: Bank A/c Dr; to Premium for Goodwill A/c (new partner's share of goodwill). Then Premium for Goodwill A/c Dr; to Old Partners' Capital A/cs (in sacrificing ratio); If premium is withdrawn by old partners, credit Bank and debit their Capital A/cs.
Revaluation Account: Debit: decrease in assets, increase in liabilities, unrecorded expenses. Credit: increase in assets, decrease in liabilities, unrecorded gains; Credit balance is profit and debit balance is loss, shared by old partners in the old ratio.
Reserves and accumulated profits: General Reserve / P&L (Cr) A/c Dr; to Old Partners' Capital A/cs (old ratio); Accumulated losses are debited to old partners in the old ratio.

How to solve Admission of a Partner questions

Use this order for any admission question. Write the ratios first, because every later entry depends on them.

1Write the old ratio and the new ratio. Work out the new partner's share and the sacrifice of each old partner.
2Find the sacrificing ratio: old share minus new share for each old partner. Reduce to the simplest ratio.
3Work out goodwill: premium brought in by the new partner, or goodwill of the firm and the new partner's share of it. Pass the entries for bringing in and distributing it.
4Prepare the Revaluation Account for changes in assets and liabilities. Transfer the profit or loss to old partners' capital accounts in the old ratio.
5Distribute reserves, accumulated profits and losses to old partners in the old ratio.
6Record the new partner's capital. If capitals must be adjusted to the new ratio, calculate the amounts and pass the entries through cash or current accounts.
7Prepare the Partners' Capital Accounts, then the new Balance Sheet. Check that both sides agree.

Quickest way: Ratio-first, then single capital table

When to use it: Use this for long questions where you must show entries, the Revaluation Account, capital accounts and a balance sheet within the time.

Box the old ratio, new ratio and sacrificing ratio at the top of the page.
Pass only the entries the question needs. Skip a separate goodwill entry if you can show it directly in the capital accounts and mention the working.
Write the Revaluation Account and show profit or loss clearly with the share of each partner.
Build one Partners' Capital Account with columns for each partner. Put all adjustments in it: goodwill, reserves, revaluation, new capital, cash brought in.
Take balances from the capital account into the balance sheet. Add Bank for cash brought in and adjust assets and liabilities as revalued.
Check that totals tally. If not, check the revaluation effect and goodwill first.

Common mistakes in Admission of a Partner

Giving goodwill to all partners including the new partner.
Students think goodwill belongs to the whole firm after admission.
Fix: Credit goodwill only to the old partners, in the sacrificing ratio.
Sharing revaluation profit or loss in the new ratio.
Students use the ratio that applies after admission.
Fix: Revaluation relates to the period before admission. Share it in the old ratio.
Taking the sacrificing ratio as the old ratio when the question gives a different arrangement.
The old-ratio rule is learnt without its condition.
Fix: Read the question. Use the old ratio only when no other sacrifice is stated. Otherwise compute old share minus new share.
Distributing reserves in the new ratio or not at all.
Students treat reserves as part of firm capital instead of old partners' profits.
Fix: Transfer reserves and accumulated profits to the old partners in the old ratio. Show the entry.
Forgetting to deduct existing goodwill from the books when the question requires it.
The goodwill account is not checked against the balance sheet.
Fix: If goodwill already appears in the books, write it off to the old partners in the old ratio, then raise goodwill afresh.
Not including the new partner's capital in the actual capital, or using only the old partners' capital, when calculating hidden goodwill.
Students compare the implied total capital with the old partners' capital alone, or forget to adjust the old capitals for reserves and revaluation.
Fix: Implied total capital = new partner's capital ÷ his share. Actual total capital = old partners' adjusted capitals (after reserves and revaluation) plus the new partner's capital. Hidden goodwill = implied total capital − actual total capital.

Worked examples

Example 1

A and B share profits in the ratio 3:2. They admit C for a 1/5 share. C takes 2/5 of his share from A and 3/5 of his share from B. C brings ₹50,000 as capital and ₹10,000 as premium for goodwill. Find the new ratio and the sacrifice, and pass the goodwill entries.

Show the solution

C's share = 1/5. From A: 2/5 × 1/5 = 2/25. From B: 3/5 × 1/5 = 3/25.
A's old share = 3/5 = 15/25. New share = 15/25 − 2/25 = 13/25.
B's old share = 2/5 = 10/25. New share = 10/25 − 3/25 = 7/25.
C's share = 1/5 = 5/25. New ratio = 13:7:5. Check: 13 + 7 + 5 = 25.
Sacrificing ratio = 2:3, as per the given sacrifice. Note that this is not the old ratio 3:2. The question states a specific sacrifice, so the default rule (sacrifice in the old ratio) does not apply.
Premium ₹10,000 is shared in the sacrificing ratio: A = 10,000 × 2/5 = ₹4,000; B = 10,000 × 3/5 = ₹6,000.
Entry 1: Bank A/c Dr ₹60,000; to C's Capital A/c ₹50,000; to Premium for Goodwill A/c ₹10,000.
Entry 2: Premium for Goodwill A/c Dr ₹10,000; to A's Capital A/c ₹4,000; to B's Capital A/c ₹6,000.

Answer: New ratio is 13:7:5. Sacrificing ratio is 2:3 (not the old ratio 3:2, because the sacrifice is stated). A is credited ₹4,000 and B ₹6,000 for goodwill.

Example 2

X and Y share profits equally. Their capitals are ₹80,000 each and there is a General Reserve of ₹20,000. Z is admitted for a 1/4 share. Z brings ₹60,000 capital and his share of goodwill in cash. Goodwill of the firm is valued at ₹40,000. The goodwill brought in by Z is credited to the old partners' capital accounts and is not withdrawn. Stock of ₹30,000 is to be shown at ₹26,000. Prepare the Revaluation Account and the Partners' Capital Accounts.

Show the solution

Z's share = 1/4. Z takes from X and Y equally: 1/8 each, as old ratio is equal.
New shares: X = 1/2 − 1/8 = 3/8; Y = 3/8; Z = 2/8. New ratio 3:3:2.
Sacrificing ratio = 1:1 (each gives 1/8).
Z's share of goodwill = 40,000 × 1/4 = ₹10,000. Z brings this in cash. It is credited to X and Y capital accounts in the sacrificing ratio, ₹5,000 each. It is not withdrawn.
Revaluation Account: Debit side: To Stock A/c (reduction) ₹4,000. Credit side: nil. Debit balance = loss ₹4,000, transferred to X ₹2,000 and Y ₹2,000 in the old ratio.
General Reserve ₹20,000 goes to X ₹10,000 and Y ₹10,000 in the old ratio.
X's capital: 80,000 + 5,000 goodwill + 10,000 reserve − 2,000 loss = ₹93,000.
Y's capital: 80,000 + 5,000 + 10,000 − 2,000 = ₹93,000.
Z's capital = ₹60,000, as given. Capitals are not adjusted to the new ratio. Cash brought in by Z = 60,000 + 10,000 = ₹70,000.

Answer: Revaluation loss is ₹4,000 (Stock written down, X ₹2,000 and Y ₹2,000). Closing capitals: X ₹93,000, Y ₹93,000, Z ₹60,000. New ratio is 3:3:2.

Exam tips

Write the new ratio and sacrificing ratio before anything else. Marks are often given for these alone.
Show each ratio calculation as a fraction with a common denominator. It makes errors easy to spot.
Label every entry with its narration. State the ratio used, such as old ratio or sacrificing ratio.
Check if goodwill is already in the books or if a reserve is present. These are easy to miss and cost marks.
For MCQs, know the difference: sacrificing ratio is old share minus new share, while gaining ratio is new share minus old share (used on retirement).

Practice questions from Partnership and LLP Accounts

Under the Limited Liability Partnership Act, 2008, which statement about designated partners of an LLP is correct?

Admission of a Partner: frequently asked questions

How do I calculate the sacrificing ratio?

Subtract each old partner's new share from the old share. The result is each partner's sacrifice. Compare the sacrifices as a ratio and reduce it. If the question gives no other arrangement, old partners sacrifice in their old ratio.

What is the difference between sacrificing ratio and gaining ratio?

Sacrificing ratio is old share minus new share and is used on admission. Gaining ratio is new share minus old share and is used when a partner retires or dies. Sacrificing partners receive goodwill, and gaining partners pay for it.

Who gets the revaluation profit or loss on admission?

Only the old partners, in their old profit sharing ratio. The revaluation covers the period before the new partner joined, so the new partner has no share in it.

What is the journal entry for goodwill when the new partner brings cash?

Debit Bank A/c, and credit Premium for Goodwill A/c with the new partner's share of goodwill. Then debit Premium for Goodwill A/c and credit old partners' capital accounts in the sacrificing ratio.