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Summary ASSIGHNMENT 2
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Summary of 2 pages for the course Financial Accounting at Unisa (STEP BY STEP)
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Accounting procedure based on the going-concernperspective
This accounting procedure outlines the steps taken when a partnership undergoes a change in its
ownership structure from a going-concern perspective, particularly focusing on the admission of a new
partner. Here's a summary:
1. Prepare Preliminary Financial Position:
• Compile a pre-adjustment trial balance or preliminary statement of financial
position to serve as a starting point for recording changes.
• This step is not required for simplification purposes.
If the change in the ownership structure takes place during a financial period
• Books will not be closed off, meaning current accounts will not be closed off to capital accounts
2. Apportion Revaluation Surplus:
• Close off the revaluation surplus account and allocate it to partners' capital accounts
based on the existing profit-sharing ratio.
Debit : Revaluation Surplus
Credit : Capital ( Revaluation Surplus amount x ratio of partners before admission of new partner)
Credit:
3. Record Valuation Adjustments:
• Make adjustments to the values of assets and liabilities, as necessary, and record them
in a valuation account.
4. Record Goodwill:
• If applicable, record any goodwill initially acquired according to partnership agreements.
5. Record Change in Ownership Structure:
• Record the contribution of the new partner to relevant asset and liability accounts, as
well as the new partner's capital account.
Debit : Bank
Credit : Capital of new partner
Next : Calculate ratio
6. Reinstate Revaluation Surplus:
• Reopen the previously closed revaluation surplus account and allocate it to new
partners' capital accounts based on the new profit-sharing ratio.
Debit : Capital account
Credit : Revaluation account
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