Question
State the correct order of steps when a new partner joins with both revaluation and goodwill.
tap to reveal answer
Answer
1. Prepare the **revaluation account** (existing partners, old ratio) → update capital accounts
2. Record **goodwill in** (old ratio) → credit existing partners' capital accounts
3. Record **goodwill out** (new ratio) → debit all partners' capital accounts
4. Record new partner's **cash introduction** → debit bank, credit new partner's capital account
5. Prepare updated **statement of financial position**