Sonu and monu are partners they admit gopal

General
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sonu and monu are partners they admit gopal

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## Sonu and Monu are partners, they admit Gopal.

Answer:

When existing partners Sonu and Monu admit a new partner, Gopal, into their partnership firm, several important adjustments and accounting steps are typically involved. Below is an overview of these steps and considerations:

1. Revaluation of Assets and Liabilities

Before admitting Gopal, Sonu and Monu commonly revalue the firm’s assets (e.g., building, machinery) and liabilities (e.g., outstanding loan, creditors) to reflect their current market values. This ensures that any undisclosed profits or losses (due to asset appreciation/depreciation or liability changes) are recognized among the old partners (Sonu and Monu) in their old profit-sharing ratio.

2. Calculation and Treatment of Goodwill

Goodwill often represents the firm’s reputation or earning capacity. When Gopal is admitted:

  1. Valuation of Goodwill: The firm calculates goodwill based on agreed methods (e.g., average profit method, super profit method).
  2. Compensation to Old Partners: Gopal compensates Sonu and Monu for their share of goodwill, since they helped build the reputation. The compensation is credited to the capital accounts of Sonu and Monu in the old ratio.

3. Determination of New Profit-Sharing Ratio

Sonu, Monu, and Gopal must agree on a new profit-sharing ratio that reflects Gopal’s share. Common scenarios include:

  • Gopal is given a specified share of profits (e.g., 1/4).
  • The remaining share is divided between Sonu and Monu in their old ratio.

4. Adjustment of Capitals

After revaluation and goodwill treatment, each partner’s capital account is adjusted. Gopal’s capital contribution is added to the firm’s bank account or assets. The profit or loss from revaluation is transferred to the old partners’ capital accounts.

5. Key Journal Entries (Simplified)

  1. Revaluation of Assets/Liabilities
    – Debit or credit the revaluation account to record the increase or decrease in values.
    – Distribute the resulting profit or loss among old partners (Sonu and Monu) in the old ratio.

  2. Goodwill Compensation
    – Debit Gopal’s Capital (if he brings goodwill in cash or kind).
    – Credit Sonu’s Capital and Monu’s Capital for their share in goodwill.

  3. Introduction of Gopal’s Capital
    – Debit Cash/Bank.
    – Credit Gopal’s Capital.

Summary Table

Step Action Impact
1. Revaluation Revalue assets and liabilities Any net gain or loss affects Sonu’s and Monu’s capital in the old ratio
2. Goodwill Calculation Compute firm’s goodwill Determines Gopal’s goodwill payment to Sonu and Monu
3. Compensation to Old Partners Gopal pays for goodwill Sonu’s and Monu’s capital accounts are credited in the old ratio
4. New Profit-Sharing Ratio Decide how profits will be shared Profit share changes from (Sonu:Monu) to (Sonu:Monu:Gopal) in the new ratio
5. Capital Adjustment Adjust each partner’s capital account Reflects revaluation, goodwill, and Gopal’s introduction of capital

By following these steps, Sonu, Monu, and Gopal can accurately record and manage the admission of a new partner, ensuring clarity in profit-sharing, capital structure, and overall financial statements.

@LectureNotes