Question

State Whether the following Statement is True or False:

A new partner is liable for the past losses of a firm.

Answer 1

The statement is false.

Explanation:

• A new partner is not liable for any losses incurred by the firm before their date of admission.
• Past losses belong entirely to the period when the old partners ran the business.
• Therefore, all accumulated losses appearing in the Balance Sheet at the time of admission are completely written off by debiting the old partners' capital accounts in their old profit-sharing ratio.