Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 16 - No. 3)
How does the admission of a new partner typically affect the partnership's existing capital accounts?
They are increased to reflect the new partner's investment.
They remain unchanged as the admission doesn't directly impact them.
They are decreased to account for the dilution of ownership.
The existing capital accounts are closed and new ones are opened.
Explanation
The existing partners' capital accounts are typically unaffected by the admission of a new partner, unless the new partner is buying into the existing partners capital.
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