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Partnership Accounts for CA Foundation: A Full Roadmap with Examples

22 April 2026·10 min·By CA Saarthi
Partnership accountsCA Foundation PartnershipGarner vs MurrayAdmission partner

# Partnership Accounts — Full CA Foundation Roadmap

Almost every Foundation attempt asks a full 20-mark partnership question. Here's how to never lose marks in it.

The core framework

Fixed vs fluctuating capital

  • Fixed: — Capital A/c is constant; all adjustments in Current A/c.
  • Fluctuating: — Everything in the Capital A/c; balance changes yearly.

    • If the question is silent, assume fluctuating.

    Profit & Loss Appropriation

    Prepare this **before** the Capital / Current A/c.

  • Dr side: — Interest on capital, Salary, Commission, Profit share to partners
  • Cr side: — Net profit b/d, Interest on drawings

    • Interest on a partner's **loan** to the firm = charge (in P&L), not appropriation. Silent deed → 6% p.a. (Sec 13(d)).

    Scenario 1: Admission

    Steps in order:

  • Calculate new ratio and sacrificing ratio (old − new).
  • Revalue assets/liabilities → transfer profit/loss to **old** partners in **old** ratio.
  • Distribute accumulated reserves to **old** partners in **old** ratio.
  • Goodwill adjustment — premium method (most common): incoming partner brings cash for goodwill, credited to sacrificing partners in sacrificing ratio.
  • New partner brings capital (and premium if applicable).

    • Scenario 2: Retirement / Death

  • Calculate **gaining ratio** (new − old) for remaining partners.
  • Revalue assets/liabilities; profit/loss to all old partners in old ratio.
  • Distribute accumulated reserves in old ratio.
  • Goodwill: remaining partners debit their capital in gaining ratio, credit retiring partner.
  • For **death**: also add share of profit till date of death.

    • Scenario 3: Dissolution

    Open a **Realisation A/c**:

  • Dr: all assets at book value
  • Cr: all liabilities at book value
  • Record actual realisation + payments on the other side
  • Transfer profit/loss to partners in profit-sharing ratio

    • Garner vs Murray rule

    If a partner is insolvent, solvent partners bear the deficiency in the ratio of their **last agreed capitals** — not PSR.

    Worked mini-example

    A (capital ₹60k) and B (capital ₹40k) share 3:2. C admits for 1/5 with ₹30k capital + ₹10k premium.

  • Sacrificing ratio = 3:2 (simply 1/5 taken from old ratio).
  • Premium of ₹10k credited: A = 6k, B = 4k (in 3:2).
  • New ratio: A 12/25, B 8/25, C 5/25.

    • Common exam traps

  • Using PSR instead of gaining ratio on retirement.
  • Forgetting to write off existing goodwill in the books first.
  • Not transferring Joint Life Policy surrender value on death.

    • Practice 10 full problems across all 4 scenarios — you'll be able to answer any partnership question in your sleep.

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