At the time of admission of a new partner the capital accounts of the partners may be adjusted in the following ways.
1. Asking the new partner to bring in the capital on the basis of the existing partner’s capitals.
Here new partners’ capital is calculated as follows.
- Totalling the capitals of the existing partners left after making all adjustments.
- Totalling the new profit sharing rights of the old partners.
- Total capital as per
(a) is treated as the capital for the total rights as per
(b) On the basis of the above, calculating the amount of capital to be brought in by the new partner.
2. Adjusting the capital of the old partners on the basis of the capital brought in by the new partner.
This is done as follows.
- Comparing the capital of the incoming partner with the capitals of old partners.
- Asking the partner to bring in the required amount whose capital is less.
- Allowing the partner to withdraw the surplus amount whose capital is more.
