Page 43 - ISCDEBK-12

3

C H A P T E R

Admission of a Partner

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Admission of Partner or Partners
Admission of a Partner or partners means new partner or partners being admitted into partnership.
2. New Profit-sharing Ratio
New Profit-sharing Ratio is the ratio in which all the partners or partners including the new or
incoming partner or partners share future profits and losses of the firm.
3. Sacrificing Ratio
Sacrificing Ratio is the ratio in which the old or existing partners forego, i.e., sacrifice their share
in favour of the new partner or partners.

4. Goodwill
Goodwill is an intangible asset resulting from the efforts made in the past by the existing partners
of the firm which results in profits in the future years.
5. Revaluation of Assets
Revaluation of Assets means change in the value of assets, i.e., present value being different from
the book value of the assets.
6. Reassessment of Liabilities
Reassessment of Liabilities means reassessing the liabilities and determining the change, i.e.,
whether the liability is more or less than that shown in the books of account.
7. Revaluation Account
It is a nominal account, prepared to ascertain gain (profit)/loss on account of revaluation
of assets and reassessment of liabilities. It is credited with the increase in value of assets
and decrease in the value of liabilities. It is debited with the increase the value of liabilities
and decrease in the value of assets. It is closed by transferring the gain (profit) or loss to
the Capital Accounts or Current Accounts of the old or existing partners in their old profit-
sharing ratio.
8. Reserve
Reserve means accumulated or undistributed profits. It is created out of profits.
The reserve created is sometimes invested outside the business in instruments such as securities,
which then becomes a Reserve Fund.
9. Workmen Compensation Reserve
It is a reserve created out of profits for payment of compensation to workers.
10. Investments Fluctuation Reserve
It is a reserve created out of profits to meet the fall in the market value of investment.