CBSE Class 12 Accountancy Chapter 2 Notes PDF | Change in PSR & Goodwill
Prepare effectively for your CBSE Class 12 board exams and the CUET entrance test with our comprehensive Accountancy Chapter 2 notes. Download the expertly crafted PDF guide to boost your conceptual clarity and exam readiness.
Our Class 12 Accountancy Chapter 2 Notes focusing on 'Change in Profit Sharing Ratio & Goodwill Valuation' are essential for your CUET 2026 success. These CUET accountancy revision notes align with the latest CBSE syllabus to help you master financial analysis, statement interpretation, and strategic business decision-making. Download your comprehensive PDF study guide below.
CBSE Class 12 Accountancy Chapter 2 Notes
These study notes provide an in-depth exploration of core accounting principles and corporate financial structures. Strengthening your fundamentals here is crucial for tackling advanced topics such as computerized accounting, bank reconciliation, depreciation, reserves, and the rectification of errors in your board examinations.
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Review our expert-designed notes on 'Change in Profit Sharing Ratio & Goodwill Valuation' to accelerate your learning process. By simplifying complex concepts, these notes are specifically engineered to help students maximize their performance and secure top marks in both CBSE and CUET exams.
Accountancy Notes for Chapter 2 – Change In Profit Sharing Ratio & Goodwill Valuation
Aligned with the latest CBSE and CUET 2026 curriculum, our notes offer a structured breakdown of critical chapter highlights:
RECONSTITUTION OF PARTNERSHIP FIRM
1. Definition of Partnership: A formal agreement between individuals to operate a business and share profits.
2. Definition of Reconstitution: Any modification to an existing partnership agreement that leads to the termination of the old terms and the start of a new arrangement.
3. Required Adjustments: Essential processes such as goodwill valuation, asset/liability revaluation, and the distribution of reserves to ensure equity among partners during reconstitution.
III. NUMERICAL EXAMPLE (CHANGE IN PROFIT SHARING RATIO)
A change in the Profit-Sharing Ratio (PSR) serves as a fundamental case of partnership reconstitution. For instance, if partners A and B shift their profit-sharing ratio from 2:1 to 3:1, the firm must undergo formal accounting adjustments.
ADJUSTMENTS REQUIRED AT THE TIME OF CHANGE IN PSR
When a PSR change occurs, some partners gain while others sacrifice their share of future profits. To maintain fairness, the following steps are vital:
1. Calculation of the Sacrificing Ratio and Gaining Ratio.
2. Goodwill Accounting: Compensating the sacrificing partner based on the firm's valuation.
3. Treatment of Reserves and Accumulated Profits/Losses.
4. Revaluation of Assets and Liabilities.
5. Capital Adjustments (as per the partnership agreement).
SACRIFICING RATIO AND GAINING RATIO
Understanding the shift in profit shares is key to accurate accounting:
A. Sacrificing Ratio: The proportion of profit surrendered by a partner. Formula: Old Ratio - New Ratio.
B. Gaining Ratio: The proportion of profit acquired by a partner. Formula: New Ratio - Old Ratio.
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