Arrange the following statements in proper sequence in context of admission of partner.

(A) Finalising terms for admission of new partner

(B) Calculation of sacrificing/gaining ratio

(C) Finalising balance in partner's capital A/c

(D) Calculation of new profit-sharing ratio

(E) Valuation and adjustment of goodwill

Choose the correct answer from the options given below:

The correct option is (A), (D), (B), (E), (C).

When a new partner is admitted into a partnership firm, a series of accounting steps and adjustments must be performed in a logical and sequential order to ensure the books of accounts accurately reflect the new structure. Here is the step-by-step breakdown of why this sequence is correct:

1. Finalising terms for admission of new partner (A):
Before any accounting calculations or adjustments can begin, the partners must first agree upon and finalise the terms of admission. This includes determining how much capital the new partner will bring, their share of future profits, and other conditions of the partnership.

2. Calculation of new profit-sharing ratio (D):
Once the terms are finalised and the new partner's profit share is decided, the next immediate step is to compute the new profit-sharing ratio among all partners (existing and new).

3. Calculation of sacrificing/gaining ratio (B):
Using the old profit-sharing ratio and the newly calculated profit-sharing ratio, the sacrificing ratio for the existing partners is calculated. This ratio is crucial because it determines how much share of profit each existing partner has surrendered in favor of the new partner.

4. Valuation and adjustment of goodwill (E):
After determining the sacrificing/gaining ratio, the firm's goodwill is valued. The adjusting entry for goodwill is then passed, where the gaining partner (usually the incoming partner) compensates the sacrificing partners in their sacrificing ratio.

5. Finalising balance in partner's capital A/c (C):
All adjustments—including capital brought in by the new partner, share of goodwill, revaluation profit/loss, and accumulated reserves—are posted to the partners' capital accounts. The final balances in the partners' capital accounts are then computed to prepare the new balance sheet of the reconstituted firm.

Therefore, the proper sequence is (A) → (D) → (B) → (E) → (C).