what is admission of partnership ? Give with example.
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Home > Financial Accounting > Partnerships > Admission of a Partner
Admission of a Partner in Partnership
When a new partner joins a partnership the old partnership is dissolved and a new partnership is formed. Accounting for admission of new partner depends on the nature of arrangement between the existing partners and the new partner. Such an arrangement can take any of the following forms:
The new partner brings in new assetsThe new partner purchases interest in partnership from existing partners at book valueThe new partner pays a bonus for the partnership's goodwill; andThe new partner receives a bonus for the partnership's negative goodwill.
Accounting in each of the situation is discussed separately below:
New partner brings additional assets
When the new partner brings in new assets, the assets are debited at the value agreed by the partners for the purpose and the partner's capital account is credited for the total value of those assets.
Example 1
Pluto and Sedna were partners in Kuiper Space Consulting. Their respective capital balance was $45 million and $25 million. In 2005 they agreed to admit Eris who agreed to contribute a very specialized telescope worth $20 million.
The admission through introduction of new assets is recorded by the following journal entry:
hope it was helpful.
Home > Financial Accounting > Partnerships > Admission of a Partner
Admission of a Partner in Partnership
When a new partner joins a partnership the old partnership is dissolved and a new partnership is formed. Accounting for admission of new partner depends on the nature of arrangement between the existing partners and the new partner. Such an arrangement can take any of the following forms:
The new partner brings in new assetsThe new partner purchases interest in partnership from existing partners at book valueThe new partner pays a bonus for the partnership's goodwill; andThe new partner receives a bonus for the partnership's negative goodwill.
Accounting in each of the situation is discussed separately below:
New partner brings additional assets
When the new partner brings in new assets, the assets are debited at the value agreed by the partners for the purpose and the partner's capital account is credited for the total value of those assets.
Example 1
Pluto and Sedna were partners in Kuiper Space Consulting. Their respective capital balance was $45 million and $25 million. In 2005 they agreed to admit Eris who agreed to contribute a very specialized telescope worth $20 million.
The admission through introduction of new assets is recorded by the following journal entry:
hope it was helpful.
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