Arrange the steps in the correct accounting sequence at the time of admission of a partner:(A) Adjustments of capital accounts.(B) Valuation of goodwill(C) Calculation of new profit sharing ratio and sacrificing ratio.Choose the correct answer from the options given below:
- A(A), (B), (C)
- B(A), (C), (B)
- C(B), (A), (C)
- D(C), (B), (A)
Solution & Step-by-step Explanation
At the time of a partner's admission, the sequential steps are:(C) Calculation of ratios: First, compute the new profit-sharing ratio and sacrificing ratio, as these are needed to distribute goodwill premium.(B) Valuation and treatment of goodwill: Calculate and record goodwill based on the sacrificing ratio.(A) Adjustments of capital accounts: Adjust the final capitals based on the new partner's input or new ratio terms.The correct order is (C), (B), (A).