Reserves

The correct answer is A: the old reserve is credited to the capital accounts of the old partners. A reserve is an undistributed profit created before admission, so it belongs to the partners who were present when it was earned. The reserve is distributed among them in the old ratio. Option A is correct because their capital accounts increase through the credit. Option B is wrong because the new partner had no right in a pre-admission reserve. Option C is wrong because Revaluation Account records changes in asset and liability values, not distribution of an old reserve. Option D is wrong because no cash is necessarily received or paid; the entry is an internal adjustment. Memory cue: old reserve, old partners, old ratio.

A debit balance in the Profit and Loss Account indicates an accumulated loss from earlier periods, so it is treated as accumulated loss. On the admission of a partner, this loss is written off through the old partners’ capital accounts in their old profit-sharing ratio. Option B is incorrect because a credit balance represents accumulated profit. Exam tip: debit balance means accumulated loss, while credit balance means accumulated profit.

A credit balance in the Profit and Loss Account represents accumulated profit earned by the business. On the admission of a partner, it is credited to the capital accounts of the old partners in their old profit-sharing ratio. Therefore, option A is correct. A debit balance would represent accumulated loss, not a credit balance. Exam tip: Credit balance means profit, while debit balance means loss.

The general reserve is distributed in the old profit-sharing ratio. The total parts are \(3+1=4\), so A’s share is \(3/4\). Therefore, A’s share = \(₹32,000 \times 3/4 = ₹24,000\). ₹8,000 is B’s share, not A’s. Exam tip: Accumulated profits and reserves existing before admission are generally distributed among old partners in their old profit-sharing ratio.

The total old ratio is \(5+3=8\). Y’s share is \(3/8\), so the amount credited to Y is \(₹64,000 \times 3/8 = ₹24,000\). ₹40,000 is X’s share because X’s ratio is 5/8. Exam tip: A reserve is distributed among old partners in their old profit-sharing ratio.

An old reserve is created from profits earned before the new partner’s admission, so it belongs only to the old partners. It is distributed among the old partners in their old profit-sharing ratio, not in the new ratio. Exam tip: profits accumulated before admission are credited to the old partners in the old ratio.

Accumulated loss is a loss attributable to the old partners in their profit-sharing ratio, and it reduces their capital balances. A reduction in a partner’s capital is recorded by debiting the capital account, so the correct answer is the debit side. Crediting the account would increase capital, which is contrary to writing off a loss. Exam tip: losses and drawings generally debit a capital account, while profits credit it.

Accumulated profit or a reserve represents profit earned for the old partners. When it is distributed in the old profit-sharing ratio, each old partner’s capital or current account increases, so these accounts are credited. The debit side would indicate a reduction or loss, not the distribution of accumulated profit. Exam tip: Profit or reserve transferred to old partners is credited to their capital or current accounts.

The credit balance of the Profit and Loss Account is distributed among the old partners in their old profit-sharing ratio. B’s share is 3/5, so B’s amount = ₹25,000 × 3/5 = ₹15,000. ₹10,000 is A’s share, not B’s. Exam tip: For distributing accumulated profits or reserves, use the old profit-sharing ratio unless the question specifies otherwise.

A debit balance represents a loss, which is debited to the partners’ accounts in the old profit-sharing ratio. A’s share is \(4/(4+5) = 4/9\). Therefore, the amount debited to A is ₹18,000 × \(4/9\) = ₹8,000. ₹10,000 is B’s share because B’s fraction is 5/9. Exam tip: Treat a debit balance as a loss and multiply it by the partner’s fraction of the old ratio.

Capital reserve can be distributed among old partners like profit. Other items are generally losses or expenses.

Preliminary expenses are treated like old loss when written off. They are debited to old partners.

B's share is 1/3 of ₹15000 which is ₹5000. Advertisement suspense expenditure is written off like accumulated loss.

First partner's share is 5/8 of ₹24000 which is ₹15000. Preliminary expenses are written off in old ratio.

If there is no claim this reserve is old profit. So the full balance is shared among old partners in old ratio.

₹50000 will be kept for the claim and balance ₹30000 will be distributed. Only remaining amount goes to old partners.

Excess claim = Claim − Reserve = ₹60,000 − ₹45,000 = ₹15,000. Since the claim exceeds the reserve, the additional ₹15,000 is recorded as a loss in the Revaluation Account. In such questions, subtract the available reserve from the claim amount.

This reserve is created for fluctuations in investment value. So fall in investments is first adjusted from it.

The fall in the value of investments is ₹1,20,000 − ₹1,08,000 = ₹12,000. This loss is adjusted from the Investment Fluctuation Reserve, so the correct answer is ₹12,000. ₹18,000 is the total reserve, not the amount to be adjusted. Exam tip: first calculate the actual fall in the investment value and then compare it with the reserve available.

Investment Fluctuation Reserve is created to cover a possible fall in the value of investments. When the actual fall is ₹9,000, that loss is first adjusted against the reserve of ₹25,000. The reserve is therefore reduced by the amount required to cover the known fall.

The remaining balance is \\(₹25,000-₹9,000=₹16,000\\). Since this balance is no longer needed for the stated fall, it is distributed among the old partners in their old profit-sharing ratio. Thus option A, ₹16,000, is correct. The full reserve is not distributed because ₹9,000 must first be used to absorb the investment loss.

The direct answer is Option A: ₹4,000 revaluation loss. First compare the fall in investment with the Investment Fluctuation Reserve. The fall is ₹14,000 and the reserve available is ₹10,000. The reserve can absorb only ₹10,000. Calculation: ₹14,000 − ₹10,000 = ₹4,000. Thus, ₹10,000 is adjusted against the reserve and the remaining ₹4,000 is debited to the Revaluation Account as a loss. Option A is correct because it represents exactly the uncovered fall. Option B is wrong because the excess is not normally transferred to General Reserve. Option C is wrong because the fall is a loss, not a capital gain. Option D is wrong because there is no cash profit and ₹10,000 is only the amount of reserve used. Remember: use the fluctuation reserve first; any excess fall goes to Revaluation Account.

When there is no fall the reserve is not needed. So it is shared as accumulated profit among old partners.

The general reserve is distributed among the old partners in their old profit-sharing ratio. The total ratio is 2+3+5=10, and C’s share is 5. Therefore, C’s share = 5/10 × ₹1,00,000 = ₹50,000. ₹20,000 is A’s share, while ₹30,000 is B’s share. Exam tip: For distributing reserves, use the old ratio, not the new ratio after admission.

The total ratio of the old partners is 4 + 2 + 3 = 9. The second partner’s share is ₹54,000 × 2/9 = ₹12,000. ₹18,000 would be the third partner’s share because that partner has a ratio of 3. In such questions, distribute the reserve fund in the old partners’ ratio.

Second partner's share is 2/3 of ₹45000 which is ₹30000. Capital reserve is also shared in old ratio.