Some possible Revision Notes for the chapter "Reconstitution of a Partnership Firm" in Class 12 Accountancy are:
1. Reconstitution of Partnership Firm: It refers to any change in the existing agreement of partnership, such as admission, retirement, death, insolvency, or dissolution of a partner. The Reconstitution of a Partnership Firm can be either of two types: 1) Change in the Profit Sharing Ratio; and 2) Change in the Nature of Partnership.
2. Change in Profit Sharing Ratio: It occurs when there is a change in the proportion in which the partners share the profits and losses of the firm. The reason for change could be due to an additional investment by a partner or the withdrawal of a partner from the firm. The reconstituted partnership firm needs to prepare a new partnership deed reflecting the new profit sharing ratio.
3. Sacrificing Ratio and Gaining Ratio: Sacrificing Ratio is the ratio in which the old partners agree to surrender their share of profits to accommodate the new partners. The Gaining Ratio is the ratio in which the new partners acquire the share of the profits of the old partners in the reconstituted partnership firm.
4. Accounting Treatment for Change in Profit Sharing Ratio: The amount of the sacrificed profits to be transferred to the new partner's capital account is recorded with the help of a Sacrifice Ratio Journal Entry.
5. Change in the Nature of Partnership: It refers to a situation where the partnership firm undergoes a major change in its business activities. This may occur due to a change in the product line, a change in the market, a change in the ownership structure, etc. The process of reconstitution of partnership firm involves the creation of a new partnership deed and a new capital account.
6. Accounting Treatment for Change in the Nature of Partnership: The accounting treatment involves the realization of the assets and the settlement of the liabilities of the old partnership firm. The new partnership firm needs to open a new capital account, although the old capital accounts may be carried forward in the books of accounts.
7. Retirement and Death of a Partner: It occurs when a partner decides to retire from the partnership firm due to personal reasons or if a partner dies. In case of the retirement or death of a partner, the partnership needs to be reconstituted, and a new partnership deed needs to be created accordingly.
8. Accounting Treatment for Retirement and Death of a Partner: There are certain adjustments that need to be made in the books of accounts for the retiring or deceased partner, including Interest on Capital, Goodwill, Revaluation of Assets, and distribution of Interest on Drawings.
9. Insolvency of a Partner: It occurs when a partner is unable to pay his debts. In this case, the solvent partners are required to bear the loss and settle the outstanding debts of the partnership firm.
10. Dissolution of Partnership Firm: It occurs when the business of the partnership firm comes to an end for any reason, such as mutual agreement, court order, completion of a venture, etc. The reconstituted partnership firm needs to prepare a realization account, which is used for disposing of the assets of the firm and discharging its liabilities.
More Chapters:-
Revision Notes for Admission of a Partner
Revision Notes for Retirement/death of a Partner
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