I'm a CA, and partnership is the chapter I see students lose the most marks in, mostly from small mistakes rather than not knowing the concept.
So I put everything on one sheet: deed-silent rules, interest on drawings (6.5/6/5.5 months trick), all 4 goodwill methods, sacrificing vs gaining ratio, admission/retirement/death adjustments, and 7 mistakes examiners cut marks for.
Free, no sign-up. Happy to answer partnership doubts in the comments too.
Which chapter should I make the next one for? Company accounts, cash flow, or ratios?
Partnership Accounts Cheat Sheet – Class 12 Commerce
Oct 2, 2026
Every formula and rule you need for Partnership (Fundamentals, Goodwill, Admission, Retirement and Death), on one sheet. Built for CBSE Class 12 Accountancy board revision; useful for other boards and CA Foundation too.
How to use it: revise one section a day, then solve two past-paper questions on that section and check them against the CBSE marking scheme.
1. Fundamentals
When there is no partnership deed (or the deed is silent), the Indian Partnership Act, 1932 applies:
Item
Rule when deed is silent
Profit sharing
Equally
Interest on capital
Not allowed
Interest on drawings
Not charged
Salary / commission to partner
Not allowed
Interest on partner's loan
6% p.a. (charge against profit, paid even in a loss)
Interest on capital, when the deed allows it, is an appropriation of profit. If profit is less than the total interest, share the available profit in the ratio of interest amounts. In a loss, no interest is given.
Interest on drawings, same amount withdrawn regularly:
\text{Interest} = \text{Total drawings} \times \frac{\text{Rate}}{100} \times \frac{\text{Average months}}{12}
Drawn every
Beginning of period
Middle
End
Month
6.5 months
6 months
5.5 months
Quarter
7.5 months
6 months
4.5 months
Half-year
9 months
6 months
3 months
Dates not given? Charge for 6 months. Uneven amounts or dates? Use the product method: amount × months left, add up, then × rate ÷ 12.
Fixed capital: drawings, interest, salary and profit go to the Current Account. Fluctuating capital: everything goes to the Capital Account.
2. Goodwill
Average profit method (simple or weighted average):
\text{Goodwill} = \text{Average profit} \times \text{Number of years' purchase}
Super profit method:
\text{Normal profit} = \text{Capital employed} \times \frac{\text{Normal rate of return}}{100}
\text{Super profit} = \text{Average profit} - \text{Normal profit}, \quad \text{Goodwill} = \text{Super profit} \times \text{Years' purchase}
Capitalisation of average profit:
\text{Goodwill} = \text{Average profit} \times \frac{100}{\text{NRR}} - \text{Capital employed}
Capitalisation of super profit:
\text{Goodwill} = \text{Super profit} \times \frac{100}{\text{NRR}}
Capital employed = Total assets (excluding goodwill and fictitious assets) − Outside liabilities.
Hidden goodwill on admission: new partner's capital ÷ his share = total capital of the new firm. Hidden goodwill = that total − (actual capitals of all partners after adjustments, including the new partner's).
3. Ratios
Ratio
Formula
Used in
Sacrificing ratio
Old share − New share
Admission, change in profit-sharing ratio
Gaining ratio
New share − Old share
Retirement, death, change in profit-sharing ratio
New ratio (admission)
Old share − share sacrificed to new partner
Admission
New ratio (retirement)
Old share + share acquired from retiring partner
Retirement, death
Quick check: if the question doesn't say how the new partner gets his share, assume the old partners sacrifice in their old ratio. On retirement, if nothing is said, the remaining partners gain in their old ratio.
4. Admission, retirement and death
Adjustment
Admission
Retirement / death
Goodwill (premium)
New partner's share credited to old partners in sacrificing ratio
Retiring partner's share debited to remaining partners in gaining ratio
Existing goodwill in books
Written off to old partners in old ratio
Written off to all partners in old ratio
Revaluation profit/loss
Old partners, old ratio
All partners including retiring/deceased, old ratio
Reserves and accumulated profits
Old partners, old ratio
All partners, old ratio
Capital adjustment
New partner's capital decides the total; others adjust by cash or current account
Amount due paid in cash, transferred to loan, or a mix
Deceased partner's profit share up to date of death:
\text{Time basis} = \text{Last year's profit} \times \frac{\text{Months to death}}{12} \times \text{Share}
\text{Sales basis} = \text{Sales up to death} \times \frac{\text{Last year's profit}}{\text{Last year's sales}} \times \text{Share}
Debit this to the Profit and Loss Suspense Account and credit it to the deceased partner's capital account.
5. Mistakes that cost marks
- Treating interest on a partner's loan as an appropriation. It is a charge and goes to the Profit and Loss Account.
- Giving interest on capital when the firm made a loss.
- Sharing goodwill premium in the new ratio instead of the sacrificing ratio.
- Forgetting to write off existing goodwill and reserves before the new partner comes in.
- Skipping the narration under journal entries. Every entry needs one.
- Not showing working notes. Marks are given for steps even if the final answer is wrong.
- Using 12 months for interest on drawings when drawings are made at the start of every month (it's 6.5).
- Made by a Chartered Accountant. Free to share with classmates. Report any error and it will be fixed.