Partnership final account in the case of admission of a partner in a firm involves dividing the accounting year into two periods, determining expenses and incomes, and sharing profits accordingly. Different methods like Fixed capital method and Fluctuation capital method are used for this purpose. The process includes dividing net profit or loss among partners in old and new ratios based on pre-admission and post-admission periods. Various expenses such as Selling and Distribution Expenses, Financial Expenses, and others need to be allocated between the two periods. The admission of a new partner during the accounting year impacts profit sharing and requires careful calculation and adjustment in the final accounts.

• Partnership Final Account
• Admission of Partner
• Profit Sharing
• Fixed Capital Method
• Fluctuation Capital Method

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Partnership Final Account

PowerPoint presentation about 'Partnership Final Account'. This presentation describes the topic on Partnership final account in the case of admission of a partner in a firm involves dividing the accounting year into two periods, determining expenses and incomes, and sharing profits accordingly. Different methods like Fixed capital method and Fluctuation capital method are used for this purpose. The process includes dividing net profit or loss among partners in old and new ratios based on pre-admission and post-admission periods. Various expenses such as Selling and Distribution Expenses, Financial Expenses, and others need to be allocated between the two periods. The admission of a new partner during the accounting year impacts profit sharing and requires careful calculation and adjustment in the final accounts.. Download this presentation absolutely free.

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2. Partnership Final Account Partnership final account is prepared in same style as we prepared in S.Y.J.C. Where we have to prepare Trading Account, Profit and Loss Account, Partners Capital Account, Profit and Loss Appropriation Account (if necessary) and Balance Sheet. Now we have to studied partnership final account in case of---- Admission of Partner in partnership firm during accounting year. Retirement of any partner of partnership firm during accounting year and Death of any partner of partnership firm during accounting year. Simple final account of partnership. There are two method which are Fixed capital method Fluctuation capital method.

3. Partnership Final Account Admission of partner in partnership firm:- A partner can be admitted in partnership during any date of accounting period. If a partner is admitted on 1stday of accounting year, he will be get his share of profit or loss earned during entire year. Example: If a firm whose accounting year begins on 1stJanuary and admits new partner on 1stJanuary, he will get his share of profits earned during the entire year. However if a new partner is admitted on any other day during year. Example: on 1stOctober 2013, new partner is admitted in partnership firm and partnership accounting end on 31stDecember 2013, so new partner can share in profits only during the period of 1-10-2013 to 31-12-2013. Thus total profit for 2013 must be divided into 2 parts i.e. Profit before admission and profit after admission (also called as Pre period and Post period)

4. Partnership Final Account Admission of partner in partnership firm:- How division of profits is done when partner is admitted during any day of accounting year shown below: Steps 1 What is to be done Divide accounting year in 2 periods How it is to be done a. b. Period upto date of admission Period after date of admission 2 Divided all Expense in 2 periods a. b. c. d. On basis of Time (all Fixed expenses) On basis of Sales ( all Other expenses) As per details given Specially in a particular period 3 Divided all Incomes in 2 periods a. b. c. d. On basis of Time On basis of Sales As per details given Specially in a particular period 4 Divided Net Profit or Net Loss between 2 periods a. NP or NL upto admission among old partners in old ratio. NP or NL after admission among all partners in new ratio. b.

5. Partnership Final Account Admission of partner in partnership firm:- Fixed Expenses Selling and Distribution Expenses Financial Expenses Insurance, rent and Repairs Salesman commission Travelling expenses Salary / salesman Interest and bank charges Electricity Bad debts or provision for bad debts Discount given or provision for discount on debtors Salaries/ Salaries and wages Carriage outward Postage and Telegram Warehouse charges Printing and stationery Packing charges Legal Fees Royalties on sales Audit Fees Advertising Sundry expenses or Trade expenses expenses/ General Sales promotion expenses Goods given as a free sample

6. Partnership Final Account Goodwill: Goodwill means the high amount of profits expected in future due to the past reputation of the firm. In simple word it is money value of business reputation. A new partner must compensate the old partners for their sacrifice of share in future profits and the efforts made by them in past to build up the reputation and goodwill of the firm. If the new partner pays cash for goodwill to the old partners privately, no entry will be passed in books of accounts. In other cases, the like Goodwill bought in cash and retained. Only part of Goodwill brought in cash and cash is retained. Goodwill brought in cash is withdrawn by old partners. Goodwill amount already existing at the time of admission is written off.

7. Partnership Final Account Goodwill: Treatment of Goodwill: 1) When Full amount of goodwill brought by new partner in cash and Written off a) Cash A/c ------------------------------------------Dr To Goodwill A/c b) Goodwill A/c -------------------------------------Dr To Old Partners Capital A/c (Sacrifice ratio) (In short effect is on only Partner Capital A/c Credit side of old partners column) 2) When Goodwill account is revalued and written off. a) Goodwill A/c ------------------------------------------Dr To Old Partner Capital A/c (in old ratio) b) All Partners Capital A/c (in New ratio)--------------Dr To Goodwill A/c ( In short effect is on Partners Capital Account Debit side (all partners) and credit side of Partners Capital Account in old partners column only.)

8. Partnership Final Account Retirement of partner in partnership firm: Apartner can be retired in partnership during any date of accounting period. If a partner is retired on 1stday of accounting year, he will not be eligible to get his share of profit or loss earned during entire year. Example: If a firm whose accounting year begins on 1stJanuary and retired one partner on 1stJanuary, he will not be eligible to get his share of profits earned during the entire year. However, if a new partner is retired on any other day during year. Example: On 1stOctober 2013, if any partner is retired from partnership firm and partnership accounting end on 31stDecember 2013, so retiring partner can share in profit only during the period of 1-01-2013 to 30-09-2013. Thus, total profit for 2013 must be divided into 2 parts i.e. Profit before Retirement and profit after Retirement (also called as Pre period and Post period)

9. Partnership Final Account Retirement of partner in partnership firm: How division of profits is done when partner is retired during any day of accounting year shown below: Steps What is to be done 1 Divide accounting year in 2 periods b. Period after Retirement 2 Divided all Expense in 2 periods b. On basis of Sales ( all Other expenses) c. As per details available d. Specially in a particular period 3 Divided all Incomes in 2 periods b. On basis of Sales c. As per details available d. Specially in a particular period 4 Divided Net Profit or Net Loss between 2 periods b. NP or NL after retirement among remaining partners in new ratio. How it is to be done a. Period upto Retirement a. On basis of Time (all Fixed expenses) a. On basis of Time a. NP or NL upto retirement among old partners in old ratio. In case of retirement of partner, amount payable by firm to decreased partner (retired partner) is transferred as his/her LOAN ACCOUNT always. If there is outstanding period then interest is also calculated on LOAN amount and this interest is payable by remaining partners.

10. Partnership Final Account Goodwill adjustment on day of Retirement: 1) If goodwill is raised to its full value i.e. Goodwill bought into the books only. Goodwill A/c ------------------------------------------Dr To All Partners Capital A/c 2) If goodwill is raised to its full value i.e. Goodwill bought into the books and written off. a) Goodwill A/c ------------------------------------------Dr To All Partners Capital A/c (Old PSR) b) Remaining Partners Capital A/c--------------------Dr ( New PSR) To Goodwill A/c In simple world --------- Remaining Partners Capital A/c--------------------Dr (New PSR) To All Partners Capital A/c (Old PSR)

11. Partnership Final Account Death of partner in partnership firm: When partner retires he leaves firm voluntarily. When a partner dies, he stops to be a partner compulsorily. Thus death is compulsory retirement. When partner die following adjustments have to be made. There is change in profit sharing ratio. The undistributed profits, reserve or losses are divided among all partners. Goodwill may be valued and adjusted. The assets and liabilities are revalued. The decreased partners share in profit of the firm till his or her death is calculated. The total amount due the decreased partner is calculated. This amount is payable to the legal heirs, Successors or executors of the will of the decrease partner. If there is outstanding period, then interest is calculated on amount payable to decreased partner. This interest is borne by other remaining partners in their profit sharing ratio.

12. THANK YOU!! Assistant Prof. Pradeep H. Tawade DEPARTMENT OF ACCOUNTANCY, NSS College of Commerce & Eco. Tardeo, Mumbai-34 Email ID pradeeptawade26@yahoo.com Mobile No. 9619491859