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DK Goel Class 12 Accountancy Chapter 3 Solutions

DK Goel Class 12 Accountancy Chapter 3 Solutions

Q: 3. How do these solutions explain the accounting treatment for the revaluation of assets and liabilities?

The solutions clearly show how to prepare a Revaluation Account. They guide you through passing the necessary journal entries to record any increase or decrease in the value of assets and liabilities. The final profit or loss on revaluation is then correctly transferred to the old partners' capital accounts in their old profit-sharing ratio.

Class 12 DK Goel Solutions Volume 1 Chapter 3 - Admission of a Partner

Accountancy could be one of the most scoring subjects in the CBSE board exams. It has various kinds of numerical problems and sums in which a student can score full marks. However, the concepts need to be understood in detail to solve those accurately. Having your basics clear is essential when it comes to the subject.

DK Goel Solutions Class 12 Accountancy Volume 1 Chapter 3 PDF

Especially considering the board exams, one must know that mugging up does not work in this subject. Students are supposed to read a chapter twice, thrice, or as many times till it becomes clear. For better assistance, students can rely upon DK Goel Accountancy Solutions. In that case, the correct way to prepare a lesson would be:

Step 1: Read the textbook lesson and mark important areas.

Step 2: Refer to the solutions material and solve your doubt.

Step 3: Practice the related questions and sums based on that topic.

A methodical study like this would give you an in-depth understanding of a lesson. You can download the PDF of DK Goel Solutions. In this respect, the third chapter requires special mention. DK Goel Solutions Class 12 Chapter 3 is ‘Admission of a Partner’. This particular chapter is crucial to understand the ins and outs of a partnership firm.

The chapter talks about how a partnership firm is reconstituted when a new partner enters the contract. The solution of DK Goel Class 12 Chapter 3 depicts through solved sums how the admission of a partner brings changes in firm shares and accounts.

What to Study in the ‘Admission of a Partner’ Chapter?

The partnership is an agreement or deal between different individuals where they mutually decide to share the profit, risk and liabilities of a business. Any sort of a change in the existing agreement will call for changes in the contract or reconstitution of the firm. There are many modes of firm reconstitution. One of them is when there is an admission of a new partner in the business.

A firm might feel the need to admit a new partner if it faces fund shortage or capital deficit. The need to avail more managerial help or expert assistance is also fulfilled through new partners. The entry, as well as exit of partners in a business, follows the provisions of the Indian Partnership Act (1932).

When a New Partner enters the Firm, He acquires the Following Rights:

Right to share the assets of that partnership firm.
Right to share the profits of that partnership firm.

Whenever there is an admission of a new partner, the required changes are made in the existing contract. The existing co-partners are also informed of these changes.

To enter a firm, a partner has to provide an agreed sum as capital to the firm. However, if the firm happens to be a renowned or established one, the new partner might as well have to bear an additional amount of capital. This extra contribution is called goodwill or premium. The intention behind this is to compensate for the loss of existing partners, who had been gaining super profits until now.

Here is a list of values and ratios which have to be kept in mind when a new partner enters a firm:

Profit-sharing ratio.
Sacrificing ratio.
Revaluation of assets.
Reassessment of liabilities.
Valuation of goodwill.
Adjustment of capital share.
Distribution of accumulated reserves or profits.

In the textbook, all the concepts will be explained in detail. Yet, you might end up having some queries after reading this chapter from the book. For this, you can refer to Admission of a Partner Class 12 Solutions DK Goel. A better idea would be to get it downloaded in PDF from the website so that you can get back to it whenever required.

Accounting Fundamentals for Partnerships

A business can be structured in a variety of ways, such as a sole proprietorship, a partnership, or a corporation. Every type of business has its own set of constraints. As a company grows, it necessitates more cash and exposes itself to more risk.

Partnership is founded on mutual agreement, and in a partnership, they agree to share the business's money, earnings, and losses. Partners are the persons who have engaged into the partnership.

According to the Indian Partnership Act of 1932, the partnership is "the relation between individuals who have agreed to share the benefits of a business carried on by all or any of them acting for all."

Partnership Characteristics

The following aspects of a collaboration can be discussed:

It is a group of two or more people.
An agreement establishes a relationship.
Partners must share the firm's profit and loss. To produce a profit, the business must be run legally.
Partnership transactions must be carried out by all or by any one on behalf of all. The foundation of collaboration is mutual and implicit agency.

In general, a partnership deed addresses all aspects of the partners' relationship, including how profits and losses should be handled. In the absence of a partnership deed, the Indian Partnership Act of 1932 applies the following accounting rules:

The partners have no right to receive interest on their money.
There will be no interest levied on the partners' drawings.
Unless otherwise stipulated in the partnership agreement, the partners are not entitled to a salary or commission.
Regardless of their capital commitment to the partnership, the profit sharing ratio will be the same.
Apart from his share of capital, a partner will be able to earn interest on any additional funds contributed as a loan to the business.

Let us now go through each Accounting for Partnership idea.

Nature of Partnership - A partnership is formed when two or more people join forces to establish an enterprise and share its profits and losses. Section 4 of the Indian Partnership Act of 1932 defines partnership as "the association of individuals who have decided to share the profits of an activity carried out by all or any of them acting for all." Individuals who have formed a partnership with one another are referred to as 'partners,' both individually and together as a 'firm.' The 'name of the firm' refers to the name under which the business is conducted. A partnership enterprise is not a separate legal entity from the partners who make it up.
Partnership Deed - A partnership is a type of company in which two or more persons enter into a legal arrangement. They agree to be co-owners, share the responsibility of operating a business, and share the profits or losses generated by the business. These characteristics of partnerships are specified in a document called a partnership deed. A partnership deed is a partnership agreement between the firm's partners that describes the terms and circumstances of the partnership. A partnership deed's goal is to offer a clear knowledge of each partner's duties, ensuring the firm's operations function smoothly.
Special Aspects of Partnership Accounts - A partnership form of company organization is quite similar to a sole proprietorship form of business, however there are several exceptions to this type of business organization that must be considered while compiling partnership firm accounts. These exclusions are known as unique characteristics of partnership accounts and include the following:
Partners' Capital Accounts must be kept up to date.
Profit and loss distribution among partners
Compensation for Incorrect Profit Appropriation
Restructuring of the Partnership Firm
The Partnership Firm Has Been Dissolved
Maintenance of Capital Accounts of Partners - All transactions involving an enterprise's partners are recorded in the books of the enterprise through their capital accounts. This includes the amount of money withdrawn as capital, capital, interest on capital, profit share, partner's income, commission to partners, interest on draws, and so on. The capital accounts of partners can be recorded in one of two ways:
Fluctuating capital method
Fixed capital method
Distribution of Profit among Partners - The enterprise's profits and losses are distributed among the partners in accordance with the conditions of the partnership agreement. As a result, if the partnership agreement is silent, the partners' share of profits and losses is equal. The firm's earnings and losses are divided among the partners in a predetermined ratio. If the partnership deed is silent, the partnership firm's profits and losses are to be shared equally by all partners.
Guarantee of Profit to a Partner - A guarantee is described as a guarantee of a particular amount of gains by one or more partners and, in some situations, the enterprise, with the burden of guarantee undertaken by the party providing such a guarantee. To put it another way, it is a predetermined minimum sum for the partner who is provided such a guarantee. If the actual profit share is less than the agreed amount, the deficit will be borne by the business or by any of the partners. In such a case, a company will make a number of 'Adjustments.' If the actual profit share is less than the agreed amount, the firm or any of the partners will bear the deficit.
Past Adjustments - A lot of attention is devoted to the fact that there should be no errors in accounts while producing the book of accounts in a partnership business so that the financial information is appropriately represented. The accuracy of the accounting assists the firm in maintaining a truthful and fair image of the business, which is necessary for future decision making. Even after all of this, there is still a possibility that certain inaccuracies may be recorded, resulting in an erroneous portrayal of the transaction in the accounts. Such inaccuracies are readily rectifiable if discovered prior to final account preparation. Past modifications can be used to make these corrections.

These changes can be made in terms of interest on capital, partner pay, and interest on draws, among other things. Sometimes errors or omissions are discovered after the financial accounts have been prepared and profits have been distributed among the partners in accordance with the profit sharing ratio established in the firm. In such circumstances, the current entries are not modified; instead, a new adjustment item is passed to correct the mistakes or omissions. The new item is linked to either the Profit and Loss Adjustment Account or the capital accounts of the company partners. Errors might develop as a result of changes in the partnership agreement or any retrospective effect on accounting procedures.

Final Accounts - A joint stock company's final accounts are those that are prepared at the conclusion of a fiscal year. The goal of final accounts is to present a clear image of the organization's financial status to its management, owners, or any other consumers of such accounting information. At the end of an accounting year, final account preparation is compiling a set of accounts and statements.

Brief on DK Goel Accountancy Class 12 Solutions of Chapter 3

In Chapter 3 of DK Goel Accountancy Solutions, you have answers to four exercise questions. Sum solutions in DK Goel Accountancy Class 12 Solutions Admission of a Partner are drafted in a student-friendly manner. This would make sure that students understand the solutions at once.

The first question is about calculating the sacrificing ratio of co-partners in case of a new partner’s entry. The next sum in this chapter is again finding out the sacrificing ratio and then calculating individual capital of the partners. The 3rd question in ch 3 Accounts Class 12 DK Goel is based on calculating the profit-sharing ratio of partners. The last sum in this chapter shows how to calculate the hidden goodwill and adjusted capital of partners.

You must also go through the notes after each problem in DK Goel Accountancy Class 12 Solutions Chapter 3 PDF.

Chapter Links

DK Goel Volume 1:

DK Goel Volume 2:

Commerce Related Link

Commerce Class 11 & 12 - Important Topic & Study Materials

FAQs on DK Goel Class 12 Accountancy Chapter 3 Solutions

1. How do the DK Goel solutions for Chapter 3 help in understanding the admission of a partner?

These solutions provide a step-by-step guide to all the key accounting treatments involved when a new partner joins a firm. They break down complex topics like goodwill valuation, revaluation of assets, and capital adjustments into easy-to-follow, practical steps, making it easier to prepare the final balance sheet of the reconstituted firm.

2. What is the correct method to calculate the new profit-sharing ratio as shown in these solutions?

The solutions demonstrate the step-by-step method to calculate the new profit-sharing ratio and the sacrificing ratio. The typical steps include:

Calculating the remaining share of the firm after giving the new partner's share.
Distributing this remaining share among the old partners in their old profit-sharing ratio.
Combining the shares to determine the new profit-sharing ratio for all partners.
Calculating the sacrificing ratio by finding the difference between the old and new ratios for the existing partners.

3. How do these solutions explain the accounting treatment for the revaluation of assets and liabilities?

The solutions clearly show how to prepare a Revaluation Account. They guide you through passing the necessary journal entries to record any increase or decrease in the value of assets and liabilities. The final profit or loss on revaluation is then correctly transferred to the old partners' capital accounts in their old profit-sharing ratio.

4. Why is the treatment of goodwill a critical step in the admission of a partner?

Goodwill represents the value of a firm's reputation and earning capacity, built by the old partners. When a new partner is admitted, they must compensate the sacrificing partners for acquiring a share of these future profits. The solutions explain how to calculate and record this goodwill, which is essential for a fair and accurate adjustment of the partners' capital accounts.

5. What is a common mistake to avoid when dealing with accumulated profits and reserves, as per the methods in these solutions?

A common mistake is failing to distribute accumulated profits, reserves, or losses before the new partner's admission. These items belong to the old partners. The solutions emphasise that these must be transferred to the old partners' capital accounts in their old profit-sharing ratio before any other adjustments for the new partner are made.

6. How do the DK Goel solutions guide the preparation of the Partners' Capital Accounts and the new Balance Sheet?

The solutions provide a comprehensive, end-to-end process. They show how to post all adjustments—such as the new partner's capital, goodwill, revaluation profit/loss, and accumulated reserves—into the Partners' Capital Accounts. Finally, they guide you in preparing the new Balance Sheet, ensuring all assets and liabilities are shown at their revised values and the capital accounts are correctly balanced.

7. Do the DK Goel solutions for Chapter 3 cover the different cases of goodwill treatment?

Yes, the solutions cover various scenarios for treating goodwill as per the CBSE 2025-26 syllabus. This includes when the new partner brings their share of goodwill in cash (premium method), when goodwill is raised and written off, and how to deal with hidden or inferred goodwill when its value is not explicitly stated in the problem.