Admission of partner

A new partner can only be admitted into a partnership with the consent of all the continuing partners.
This is based on the principle of delectus personae. It states that “no one becomes a member of the
partnership without the consent of all the members. This is because a partnership is based on mutual
trust and confidence of the partners.” A person may become a partner in an existing partnership by
either of the following:
a. Purchase of an interest from one or more of the existing partners, or
b. Investment of assets in the partnership by the new partner.

Purchase of Interest
A new partner may be admitted when he purchases part or all of the interest of one or more of the
existing partners. When the new partner purchases interest from existing partners at book value, the
transaction is recorded by crediting the capital account of the new partner and debiting the capital
account of existing partner(s). The transaction is recorded in the books for the partnership at the book
value of the share transferred and it has nothing to do with the price which the new partner has paid to
the existing partner(s). The only entry to be made in the partnership books is a transfer within equity.

Pro-Forma Entry:
(Name of Seller), Capital xxx
(Name of Buyer), Capital xxx

NOTE:
 When a new partner is admitted through “purchase of interest,” the total capital of the
partnership does not change.
 No gain or loss is recognized in the partnership books.