Reconstitution of a Partnership Firm: Admission of a Partner
Chapter 2: Accountancy - Ultimate Study Guide | NCERT Class 12 Notes, Questions, Proforma Examples & Quiz 2025
Full Chapter Summary & Detailed Notes - Reconstitution of a Partnership Firm: Admission of a Partner Class 12 NCERT
Overview & Key Concepts
- Chapter Goal: Changes in partnership via reconstitution; focus on admission, new PSR, sacrificing ratio, goodwill. Exam Focus: Illustrations 1-8, TYU-I, factors of goodwill; 2025 Updates: Emphasis on ratio calcs, premium for goodwill. Fun Fact: Consent of all for admission. Core Idea: Old partners sacrifice for new. Real-World: Firm expansion. Expanded: All subtopics point-wise with evidence (e.g., Ill 1-5), examples (e.g., Anil/Vishal), debates (e.g., equal vs specified sacrifice).
- Wider Scope: From modes to goodwill intro; sources: Pages 49-56, Ill 1-8.
- Expanded Content: Include modes tease; point-wise for recall; add 2025 relevance like digital agreements.
Introduction & Reconstitution Need
- Reconstitution: End of old agreement, new one; firm continues. Triggers: Admission, ratio change, retirement, death, insolvency.
- Objectives: Explain reconstitution, adjustments (goodwill, reval, reserves, capitals), new PSR, sacrificing ratio, goodwill valuation/treatment.
- Expanded: Evidence: TYU-I; debates: Unanimous consent risks; real: Post-2020 virtual admissions.
Conceptual Diagram: Reconstitution Flow
Flow: Existing Agreement → Trigger (Admission) → Adjustments (PSR, Goodwill) → New Agreement. Ties to Ill 1-5.
Why This Guide Stands Out
Comprehensive: All illustrations point-wise, ratio integrations; 2025 with goodwill factors, processes analyzed for calcs.
Modes of Reconstitution
- Admission: New partner for capital/help; consent required (Act 1932). Ex: Hari/Haqque admit John 1/6.
- Ratio Change: Role/capital shift. Ex: Ram/Mohan/Sohan 3:2:1 to equal.
- Retirement: Health/age. Ex: Ravi retires.
- Death: Continue with survivors. Ex: X dies, Y/Z equal.
- Expanded: Evidence: Consent rule; real: Insolvency rare but key.
Admission of New Partner
- Rights: Share assets/profits; brings capital/premium (goodwill).
- Adjustments: New PSR, sacrificing ratio, goodwill val, reval assets/liab, reserves dist, capital adjust.
- Expanded: Premium compensates super profits; evidence: Ill 1-5.
Quick Table: Key Adjustments on Admission
| Adjustment | Purpose | Example |
|---|---|---|
| New PSR | Post-admission sharing | Ill 1: 12:8:5 |
| Sacrificing Ratio | Old partners' sacrifice | Ill 6: 3:5 |
| Goodwill | Val intangible | Premium paid |
| Revaluation | Asset/liab update | Reval A/c |
| Reserves | Accum profits dist | Old ratio |
| Capitals | Adjust to new PSR | Balance transfer |
New Profit Sharing Ratio
- Calculation: New share from old (old ratio if unspecified). Ex: Ill 1 Anil/Vishal 3:2, Sumit 1/5 → 12:8:5.
- Cases: Equal from old (Ill 2), specified sacrifice (Ill 3-5).
- Expanded: Remaining share = 1 - new; allocate old ratio.
Sacrificing Ratio
- Definition: Old share - new share; for premium sharing.
- Calculation: If new PSR given, deduct. Ex: Ill 6 Rohit/Mohit 5:3, Bijoy 1/7, new 4:2:1 → sacrifice 3:5.
- Cases: Gain possible (Ill 8), whole by one.
- Expanded: Old ratio if unspecified; evidence: Ill 6-8.
Goodwill
- Meaning: Intangible from reputation/super profits.
- Factors: Nature/location/efficiency/market/special advantages.
- Need: Admission/ratio change/retirement/death/dissolution/amalgamation.
- Methods: Various (avg/super profits, capitalization); intro only.
- Expanded: Exists only in super profits; evidence: Factors list.
Summary & TYU
-
Key Takeaways: Consent for admission; ratios key; goodwill compensates. TYU: Multiple choice on PSR/sacrifice.
Key Definitions & Terms - Complete Glossary
All terms from chapter; detailed with examples, relevance. Expanded: 30+ terms grouped by subtopic; added advanced like "Premium", "Revaluation A/c" for depth/easy flashcards.
Reconstitution
Change in agreement; firm continues. Ex: Admission. Relevance: New relations.
Admission
New partner entry. Ex: John 1/6 share. Relevance: Consent required.
New PSR
Post-admission ratio. Ex: 12:8:5. Relevance: From old sacrifice.
Sacrificing Ratio
Old share sacrificed. Ex: 3:5. Relevance: Premium sharing.
Goodwill
Intangible super profit value. Ex: Reputation. Relevance: Premium paid.
Premium
Extra for goodwill. Ex: Cash/kind. Relevance: Compensates old.
Revaluation
Asset/liab update. Ex: Reval A/c. Relevance: Fair share.
Accumulated Profits
Reserves dist. Ex: Old ratio. Relevance: To old partners.
Super Profits
Above normal. Ex: Goodwill basis. Relevance: Valuation factor.
Consent
Unanimous for new. Ex: Act 1932. Relevance: Legal entry.
Retirement
Partner exit. Ex: Illness. Relevance: Mode of change.
Death
Reconstitute if continue. Ex: Survivors equal. Relevance: Continuity.
Insolvency
Partner unable. Ex: Dissolution trigger. Relevance: Rare mode.
Location Factor
Affects goodwill. Ex: Central place high. Relevance: Valuation.
Efficiency
Management impact. Ex: High productivity. Relevance: Goodwill up.
Monopoly
Market situation. Ex: Limited comp. Relevance: Super profits.
Special Advantages
Licences/patents. Ex: Import export. Relevance: High goodwill.
Valuation Methods
Avg profits etc. Ex: Super profit method. Relevance: Accurate calc.
Gain Ratio (Advanced)
On retirement. Ex: New PSR basis. Relevance: Opposite sacrifice.
Capital Adjustment (Advanced)
To new PSR. Ex: Transfer excess. Relevance: Fair capitals.
Tip: Group by modes/ratios/goodwill; examples for recall. Depth: Debates (e.g., goodwill valuation subjectivity). Historical: Act 1932. Interlinks: To Ch3 Retirement. Advanced: Reval entries. Real-Life: Firm buyouts. Graphs: Ratio pies. Coherent: Evidence → Interpretation. For easy learning: Flashcard per term with Ill snippet.
60+ Questions & Answers - NCERT Based (Class 12) - From TYU & Variations
Based on chapter + expansions (e.g., TYU-I). Part A: 10 (1 mark, one line), Part B: 10 (3 marks, four lines), Part C: 10 (4 marks, six lines), Part D: 10 (6 marks, eight lines). Answers point-wise in black text. Include calcs where apt.
Part A: 1 Mark Questions (10 Qs - Short)
1. Define reconstitution.
Change in agreement; firm continues.
2. Consent for admission?
Unanimous.
3. New partner's right?
Share assets/profits.
4. Sacrificing ratio = ?
Old - New share.
5. Goodwill is?
Intangible asset.
6. Premium for?
Goodwill compensation.
7. Factor affecting goodwill?
Location.
8. Need for goodwill val?
Admission.
9. TYU-I (a) new PSR?
9:3:4.
10. Super profits = ?
Above normal.
Part B: 3 Marks Questions (10 Qs - Medium, Exactly 4 Lines Each)
1. List 3 modes of reconstitution.
- Admission.
- Ratio change.
- Retirement.
- Ex: Death.
2. Why premium on admission?
- Compensate sacrifice.
- For super profits.
- Ex: Cash/kind.
- Old ratio share.
3. Calculate new PSR (Ill 1 type).
- Remaining = 4/5.
- Anil 3/5 of 4/5 = 12/25.
- Vishal 8/25.
- Sumit 5/25.
4. Sacrificing ratio purpose.
- Share premium.
- Old - new share.
- Ex: Ill 6 3:5.
- If gain, adjust.
5. 3 factors of goodwill.
- Nature of business.
- Location.
- Efficiency.
- Ex: Monopoly.
6. When goodwill valued?
- Admission.
- Ratio change.
- Retirement.
- Ex: Death.
7. Adjustment on admission (3).
- New PSR.
- Goodwill.
- Revaluation.
- Ex: Reserves.
8. TYU-I (b) PSR if acquire specified.
- X new 12/20 - 3/20 = 9/20.
- Y 8/20 - 1/20 = 7/20.
- Z 4/20.
- 9:7:4.
9. Meaning of goodwill.
- Reputation value.
- Super profits.
- Ex: Excess earnings.
- Intangible.
10. Special advantages factor.
- Licences/patents.
- Long contracts.
- Ex: Trademarks.
- High goodwill.
Part C: 4 Marks Questions (10 Qs - Medium-Long, Exactly 6 Lines Each)
1. Explain modes of reconstitution (3).
- Admission: New capital. Ex: John 1/6.
- Ratio change: Equal share. Ex: 3:2:1 to 1:1:1.
- Retirement: Exit. Ex: Ravi illness.
- Death: Survivors continue.
- Consent key.
- Firm reconstitutes.
2. Calculate sacrificing ratio (Ill 6 type).
- Rohit old 5/8, new 4/7 = 3/56 sac.
- Mohit old 3/8, new 2/7 = 5/56 sac.
- Ratio 3:5.
- If new PSR given, deduct.
- Old ratio if not.
- Premium basis.
3. List 4 factors affecting goodwill.
- Nature: High value products.
- Location: Central traffic.
- Efficiency: Management.
- Market: Monopoly.
- Special: Licences.
- Leads to super profits.
4. New PSR calculation cases (2).
- Old ratio: Remaining x old. Ex: Ill 1 12:8:5.
- Specified: Deduct from each. Ex: Ill 3 4:3:3.
- Sacrifice given: New = old - sac. Ex: Ill 4 27:16:17.
- Whole from one: Ill 5 11:4:5.
- Mutual agreement.
5. Need for goodwill valuation (4).
- Ratio change.
- Admission new.
- Retirement.
- Death partner.
- Dissolution sale.
- Amalgamation.
6. TYU-I (c) sacrificing ratio.
- A old 3/4, new 3/4 - 1/4/2 = 1/2 sac? Wait, calc: For 1/4 C, equal sac 3:1? No.
- A sac 3/16, B 1/16.
- Ratio 3:1.
- Old ratio assume.
- Provision (b).
- Fair sacrifice.
7. Adjustments on admission (4).
- PSR new.
- Sacrifice calc.
- Goodwill treat.
- Reval assets.
- Reserves dist.
- Capitals adjust.
8. Meaning & super profits.
- Excess over normal.
- From reputation.
- Ex: High demand.
- No goodwill if normal/loss.
- Capitalised value.
- Present value excess.
9. Ill 8 gain/sacrifice.
- Ramesh sac 10/42.
- Suresh gain 3/42.
- Whole sac by Ramesh.
- Mohan 7/42.
- New 2:3:1.
- Adjust premium.
10. Methods of goodwill (intro).
- Avg profits.
- Super profits.
- Capitalisation.
- Difficult accurate.
- Various advocated.
- One may differ.
Part D: 6 Marks Questions (10 Qs - Long, Exactly 8 Lines Each)
1. Explain admission with adjustments (6).
- Consent all; rights assets/profits.
- Capital + premium.
- New PSR: From old. Ex: Ill 1.
- Sacrifice: Old-new. Ex: Ill 6.
- Goodwill val/treat.
- Reval, reserves, capitals.
- Ex: John 1/6.
- Firm reconstituted.
2. Calculate new PSR & sacrifice (Ill 2+6).
- Ill 2: Dinesh 1/5 equal → Akshay 5/10, Bharati 3/10, D 2/10 = 5:3:2.
- Sac: Akshay 1/10, Bharati 1/10 = 1:1.
- Ill 6: New 4:2:1, old 5:3 → sac 3:5.
- Steps: Remaining allocate.
- If specified, deduct.
- Premium in sac ratio.
- Evidence: TYU.
- Fair sharing.
3. Factors & need for goodwill (full).
- Factors: Nature, location, efficiency, market, special adv.
- Ex: Monopoly high.
- Need: Sale, admission, ratio change, retirement, death, dissolution, amalgamation.
- Intangible super profit.
- Val difficult, methods vary.
- Ex: Reputation value.
- No if normal profits.
- Compensate on admission.
4. Modes of reconstitution with ex (4).
- Admission: Hari John 1/6.
- Ratio change: Ram equal.
- Retirement: Ravi illness.
- Death: X, Y/Z equal.
- All end old agreement.
- Firm continues.
- Consent/Act 1932.
- Triggers adjustments.
5. TYU-I full: Options (a-c).
- (a) 9:3:4 correct, old 3:1, C 1/4 equal sac.
- (b) 9:7:4 for specified acquire.
- (c) 3:1 sac ratio.
- Assume old if not spec.
- Calc remaining x old.
- Sac old-new.
- Evidence: Ill 1-3.
- Practice ratios.
6. Goodwill meaning & factors (6).
- Advantage good name.
- Super profits value.
- Ex: Excess earnings.
- Factors: Business nature, location, mgmt efficiency, monopoly, special (patents).
- High value added high GW.
- Central loc high traffic.
- No GW if losses.
- Capitalised differential.
7. Adjustments list with purpose.
- New PSR: Sharing basis.
- Sac ratio: Premium dist.
- Goodwill: Compensate.
- Reval: Fair assets/liab.
- Accum profits: Old share.
- Capitals: New PSR adjust.
- Ex: Reval A/c.
- Books update.
8. Ill 4 sacrifice calc.
- Ram old 3/5, sac 1/4 of 3/5=3/20, new 9/20.
- Shyam old 2/5, sac 1/3 of 2/5=2/15, new 4/15.
- Ghanshyam 3/20 + 2/15 = 17/60.
- New 27:16:17.
- Steps: Old - sac.
- New = sac total.
- Evidence: Fractions.
- Common denom.
9. Role of Act 1932 in admission.
- Consent unanimous unless deed.
- New rights assets/profits.
- Premium for established.
- Adjustments implied.
- Ex: Unless otherwise.
- Legal basis.
- Protect old partners.
- Fair entry.
10. Valuation methods intro & need.
- Methods: Avg earnings, super profit, capitalisation.
- Difficult accurate.
- Need: Change events.
- Ex: Admission premium.
- Sale business.
- Amalgamation.
- 2025: Digital val tools.
- Subjective but essential.
Tip: Include calcs in ans; practice Ill. Additional 30 Qs: Variations on ratios, goodwill scenarios.
Key Concepts - In-Depth Exploration
Core ideas with examples, pitfalls, interlinks. Expanded: All concepts with steps/examples/pitfalls for easy learning. Depth: Debates, analysis.
Reconstitution
Steps: 1. Trigger, 2. New agreement, 3. Adjustments. Ex: Admission. Pitfall: No consent invalid. Interlink: Ch1 basics. Depth: Firm continuity.
Admission
Steps: 1. Consent, 2. Share decide, 3. Premium. Ex: 1/6 John. Pitfall: No premium dispute. Interlink: Goodwill. Depth: Rights acquire.
New PSR
Steps: 1. New share, 2. Remaining old ratio. Ex: Ill 1. Pitfall: Wrong assume. Interlink: Sacrifice. Depth: Mutual decide.
Sacrificing Ratio
Steps: 1. Old-new deduct, 2. Ratio form. Ex: Ill 6. Pitfall: Gain ignore. Interlink: Premium. Depth: Compensation basis.
Goodwill Meaning
Steps: 1. Super profit id, 2. Value calc. Ex: Reputation. Pitfall: Normal profit zero. Interlink: Factors. Depth: Intangible debate.
Factors of Goodwill
Steps: 1. Assess nature, 2. Quantify impact. Ex: Monopoly. Pitfall: Subjective. Interlink: Valuation. Depth: 5 main.
Need for Valuation
Steps: 1. Event trigger, 2. Method choose. Ex: Admission. Pitfall: Skip adjust unfair. Interlink: Ch3. Depth: 6 cases.
Premium
Steps: 1. GW val, 2. Pay old sac. Ex: Cash. Pitfall: No record. Interlink: Capitals. Depth: Super profit comp.
Revaluation
Steps: 1. Assets reassess, 2. A/c pass. Ex: Gain/loss. Pitfall: Forget liab. Interlink: Reserves. Depth: Fairness.
Reserves Dist
Steps: 1. Old ratio, 2. New exclude. Ex: Accum profits. Pitfall: New share error. Interlink: Capitals. Depth: Old benefit.
Capital Adjustment (Advanced)
Steps: 1. New PSR, 2. Balance transfer. Ex: Excess to current. Pitfall: Wrong ratio. Interlink: Ch1 methods. Depth: Equity.
Gain on Admission (Advanced)
Steps: 1. New > old, 2. Adjust sac. Ex: Ill 8. Pitfall: Negative sac. Interlink: Retirement gain. Depth: Rare but possible.
Advanced: Full goodwill methods (later), dissolution. Pitfalls: Ratio fractions. Interlinks: Ch1 provisions. Real: Merger calcs. Depth: 12 concepts details. Examples: Ill. Graphs: Ratio charts. Errors: Denom mismatch. Tips: Steps evidence; compare tables (PSR vs sac).
Proforma Examples & Tables - From Text with Simple Explanations
Expanded with evidence, analysis; focus on illustrations. Added variations for practice.
Example 1: New PSR - Old Ratio Assume (Ill 1)
Simple Explanation: Remaining share x old ratio.
| Partner | Old Share | New Share Calc | New Share |
|---|---|---|---|
| Anil | 3/5 | (3/5) x (4/5) = 12/25 | 12/25 |
| Vishal | 2/5 | (2/5) x (4/5) = 8/25 | 8/25 |
| Sumit | - | 1/5 | 5/25 |
- Step 1: Sumit 1/5, remaining 4/5.
- Step 2: Allocate old 3:2.
- Step 3: Ratio 12:8:5.
- Simple Way: Default assume.
Example 2: New PSR - Equal Sacrifice (Ill 2)
Simple Explanation: New share equal from old.
| Partner | Old Share | Sacrifice | New Share |
|---|---|---|---|
| Akshay | 3/5 | 1/10 | 5/10 |
| Bharati | 2/5 | 1/10 | 3/10 |
| Dinesh | - | - | 2/10 |
- Step 1: 1/5 = 2/10 equal sac 1/10 each.
- Step 2: New = old - sac.
- Step 3: 5:3:2.
- Simple Way: Specified equal.
Example 3: Sacrificing Ratio - From New PSR (Ill 6)
Simple Explanation: Deduct old from new; common denom.
| Partner | Old Share | New Share | Sacrifice |
|---|---|---|---|
| Rohit | 5/8 | 4/7 | 3/56 |
| Mohit | 3/8 | 2/7 | 5/56 |
- Step 1: 5/8 - 4/7 = (35-32)/56 = 3/56.
- Step 2: 3/8 - 2/7 = 5/56.
- Step 3: 3:5.
- Simple Way: If gain, negative.
Example 4: Factors of Goodwill Table
Simple Explanation: 5 main impacts.
| Factor | Impact | Example |
|---|---|---|
| Nature | High value added | Stable demand |
| Location | Central high | Traffic area |
| Efficiency | Cost saving | Good mgmt |
| Market | Low comp | Monopoly |
| Special | Extra value | Patents |
- Step 1: Assess each.
- Step 2: Quantify super profit.
- Step 3: Higher = more GW.
- Simple Way: List for val.
Example 5: Adjustments Quick Ref
Simple Explanation: 6 key on admission.
| Adjustment | Method | Ratio |
|---|---|---|
| New PSR | Remaining x old | New |
| Sac Ratio | Old - new | Sac |
| Goodwill | Val & treat | Sac |
| Reval | A/c gain/loss | Old |
| Reserves | Dist accum | Old |
| Capitals | Adjust bal | New |
- Step 1: Calc PSR first.
- Step 2: Sequential.
- Step 3: Books update.
- Simple Way: Old for past, new future.
Example 6: Ill 5 Whole from One
Simple Explanation: Specified from one partner.
| Partner | Old Share | Sac | New Share |
|---|---|---|---|
| Das | 4/5 | 1/4 | 11/20 |
| Sinha | 1/5 | 0 | 4/20 |
| Pal | - | - | 5/20 |
- Step 1: Pal 1/4 from Das.
- Step 2: Das new 4/5 - 1/4 = 11/20.
- Step 3: 11:4:5.
- Simple Way: Direct deduct.
Tip: Practice fractions; troubleshoot (e.g., LCM). Added for ratios, goodwill.
Interactive Quiz - Master Admission Basics
10 MCQs in full sentences; 80%+ goal. Covers modes, ratios, goodwill.
Quick Revision Notes & Mnemonics
Concise, easy-to-learn summaries for all subtopics. Structured in tables for quick scan: Key points, examples, mnemonics. Covers modes, ratios, goodwill. Bold key terms; short phrases for fast reading.
| Subtopic | Key Points | Examples | Mnemonics/Tips |
|---|---|---|---|
| Modes |
|
John 1/6, Ravi retire. | AR RDI (Admit Ratio Retire Death Insolv). Tip: "Admit Changes, Retire Ends Role Daily" – Triggers list. |
| New PSR |
|
Ill 1 12:8:5. | R O S (Remaining Old Specified Sac). Tip: "New Partner: Remaining Old, Specify Sac" – Default old. |
| Sac Ratio |
|
Ill 6 3:5. | O N P (Old minus New = Premium). Tip: "Sacrifice Old for New Partner" – Compensation key. |
| Adjustments |
|
Reval A/c, reserves old. | PS GR CC (PSR Sac GW Reval Reserves Cap). Tip: "Admit: Adjust PSR, Sacrifice GW, Revalue Reserves, Capitalize" – Sequential. |
| Goodwill |
|
Monopoly high. | N L E M S (Nature Location Efficiency Market Special). Tip: "Goodwill: Normal Locates Efficient Markets Specially" – Factors mnemonic. |
| Val Methods |
|
Super profit method. | A S C (Avg Super Capital). Tip: "Value Goodwill: Average Super Capitalises" – Basic methods. |
Overall Tip: Use AR RDI - ROS - ONP - PSGRCC - NLEMS - ASC for full scan (5 mins). Flashcards: Front (term), Back (points + mnemonic). Print table for wall revision. Covers 100% chapter – easy for exams!
Key Terms & Provisions - All Key
Expanded table 30+ rows; quick ref. Added advanced (e.g., Gain Ratio, Reval A/c).
| Term/Provision | Description | Example | Usage |
|---|---|---|---|
| Reconstitution | Agreement change | Admission | Continuity |
| Admission | New partner | John 1/6 | Consent |
| New PSR | Post admission ratio | 12:8:5 | Sharing |
| Sacrificing Ratio | Old - new share | 3:5 | Premium |
| Goodwill | Super profit value | Reputation | Intangible |
| Premium | Extra payment | Cash for GW | Compensate |
| Revaluation | Asset reassess | Reval A/c | Fairness |
| Accum Profits | Reserves dist | Old ratio | Past adjust |
| Super Profits | Above normal | Excess earn | GW basis |
| Consent | Unanimous entry | Act 1932 | Legal |
| Retirement | Partner exit | Illness | Mode |
| Death | Survivors cont | Y/Z equal | Reconst |
| Insolvency | Unable pay | Diss trigger | Rare |
| Nature Factor | Business type | High value | GW up |
| Location | Place impact | Central | Traffic |
| Efficiency | Mgmt quality | Cost save | Profits |
| Market Sit | Comp level | Monopoly | Low comp |
| Special Adv | Extra benefits | Patents | Licences |
| Val Methods | GW calc ways | Avg profits | Vary |
| Gain Ratio | New - old | Ill 8 | Adjust |
| Capital Adj | New PSR bal | Transfer | Equity |
| Ratio Change | Existing alter | Equal share | Mode |
| Act 1932 | Consent rule | Unless deed | Provision |
| Remaining Share | 1 - new | 4/5 | Allocate |
| Old Ratio | Prior sharing | 3:2 | Default |
| Super Profit | Excess normal | Reputation | GW exist |
| Intangible | Non physical | Good name | Asset |
| Amalgamation | Firms merge | GW need | Diss |
| Dissolution | Firm end | Sale GW | Val |
| Capital Intro | New brings | Cash/kind | Rights |
| Unanimous | All agree | Admission | Required |
| Reserves | Accum P/L | Dist old | Adjust |
| Liabilities | Reassess | Reval | Fair |
Tip: Examples memory; sort subtopic. Easy: Table scan. Added 10 rows depth.
Accounting Processes Step-by-Step
Step-by-step breakdowns of core processes, structured as full questions followed by detailed answers with steps. Visual descriptions for easy understanding; focus on actionable Q&A with examples from chapter.
Question 1: How to calculate new PSR (Ill 1)?
- Step 1: Identify new share (1/5).
- Step 2: Remaining = 1 - 1/5 = 4/5.
- Step 3: Allocate old ratio 3:2 to 4/5 (Anil 3/5 x 4/5 = 12/25).
- Step 4: Vishal 2/5 x 4/5 = 8/25.
- Step 5: Sumit 1/5 = 5/25.
- Step 6: Ratio 12:8:5.
Visual: Pie old → Slice new → Remaining divide. Example: Default old ratio.
Question 2: Steps for sacrificing ratio (Ill 6)?
- Step 1: Old shares 5/8, 3/8.
- Step 2: New PSR 4:2:1, total 7, Rohit 4/7, Mohit 2/7.
- Step 3: Sac = old - new (5/8 - 4/7 = 3/56).
- Step 4: Mohit 3/8 - 2/7 = 5/56.
- Step 5: Ratio 3:5.
- Step 6: Use for premium.
Visual: Bars old/new → Subtract → Ratio. Example: Common 56 denom.
Question 3: Process to value goodwill factors?
- Step 1: List 5 factors (nature etc.).
- Step 2: Assess impact on profits (e.g., monopoly +).
- Step 3: Quantify super (normal deduct).
- Step 4: Capitalise or avg method.
- Step 5: Adjust for admission.
- Step 6: Premium calc.
Visual: Factors wheel → Super profit → Value. Example: Central loc +20%.
Question 4: Adjustments sequence on admission?
- Step 1: New PSR calc.
- Step 2: Sacrifice determine.
- Step 3: Reval assets/liab (A/c).
- Step 4: Reserves dist old ratio.
- Step 5: Goodwill treat (premium sac).
- Step 6: Capitals adjust new PSR.
Visual: Flowchart PSR → Reval → GW → Cap. Example: Gain to old.
Question 5: Steps for specified sacrifice (Ill 4)?
- Step 1: Old shares 3/5, 2/5.
- Step 2: Ram sac 1/4 of 3/5 = 3/20, new 9/20.
- Step 3: Shyam 1/3 of 2/5 = 2/15, new 4/15.
- Step 4: New = total sac 3/20 + 2/15 = 17/60.
- Step 5: Ratio 27:16:17 (LCM 60).
- Step 6: Verify total 1.
Visual: Old bar → Sac slice → New pie. Example: Fractions add.
Question 6: When/why goodwill needed?
- Step 1: Identify event (admission).
- Step 2: Val for fair share.
- Step 3: Factors assess.
- Step 4: Method choose (avg).
- Step 5: Treat (premium or adjust).
- Step 6: Books record.
Visual: Event → Factors → Val → Treat. Example: Ratio change val.
Tip: Treat as FAQ; apply to Ill. Easy: Q → Steps + Visual. Full Q&A for exam-like practice.
