Partnership with partners Admission Reconstitution and Guarantee of profit
Meaning
of Admission of a Partners:-
Admission of a
partner is one of the modes of reconstitution of Partnership firm under which
existing agreement comes to an end and a new one comes into existence. A new
partnership deed is prepared at the time of admission of a new partner. With
the ad mission of a new partner into the firm, the number of partner’s
increases and such a partner is known as incoming partner or a new partner.
Reconstitution of
Partnership admission of a partner:
Partnership is an
agreement between the partners of the firms sharing the profits of the business
carried on by all or any of acting for all. Any change in this relationship
amounts situation of the partnership firm. Hence whenever there is age in the
partnership agreement, the firm continues but it -: units to the
reconstitution of the partnership firm.
Reconstitution of the firm can take place in the following cases: -
Admission of a partner.
Change
in the profit-sharing ratio of the existing
partners. Retirement of a partner. Death of a partner.
Amalgamation of two partnership firm.
Guarantee
of minimum profit to a partner?
Sometimes
a specific partner is guaranteed to a certain amount or a new partner is
admitted into the firm with a guarantee that he shall get a certain minimum
amount of profits of the firm. Such grantee may be given either by any one of
the all old partners or by the old partners in a particular ratio. In such a
case distribution of profits will be made as:
(i) Guarantee by the firm (all the old
Partners :-Such guaranteed amount shall be paid to new partner when his share
of profit as calculated according to his profit sharing ratio is less than the
guaranteed amount.. The deficiency of such a guaranteed amount will be borne by
the other partners in their profit sharing or agreed ratio as the case may be:
(ii) Guarantee by one of
the partners: When one of the partners guarantees
another a minimum amount of profit, the adjustment is to be done through the
partner's capital account. Thus, the following steps are to be followed:
a) First,
to distribute the profits among the partners in the usual profit sharing ratio
as if there is no guarantee.
b) Secondly,
if the share of the guaranteed partner falls short of the minimum amount, the
difference is to be deducted from the original share of profit of the partner
giving guarantee and the same should be added with the original share of
profits of the guaranteed partner.
The
recovery is to be made in the ratio, they have agreed to or in profit sharing
ratio as the case may be. But he get more profit if his share of profit
according to profit sharing ratio is more.
Past Adjustments? How would you deal
with them after closing the accounts?
Sometimes after final accounts have
been prepared and the Partners Capital Accounts are closed, it is discovered
that certain items of agreement have been omitted by mistake or have been wrongly
treated. Such omission and commission usually
relate to e interest on capital, interest on drawings,
salary to a partner, profit sharing ratio, etc. As a result of this, some
partner will gain while other will lose. Therefore, for rectification of these
mistakes, the partner who gain because of these mistakes must compensate the
partner who loose.
In such a situation, instead of
altering the closed accounts, an adjustment entry is passed for recording the
net debit or net Credit accruing to each partner’s capital account as a result
of the adjustment for the various omission. In order to make this adjustment an adjustment
table is to be prepared to find out the net effect of errors, then debit the
capital of the partner who had been effect in
excess and credit the capital account of the partner who had been debited in
excess.
Don't Forget to Share and Like
No comments:
Post a Comment