Reserves

Correct answer: A. ₹8,000

The claim exceeds the reserve by ₹92,000 − ₹72,000 = ₹20,000. This excess loss is borne by the old partners in their old profit-sharing ratio of 3:2. Therefore, the amount debited to the second partner’s Capital Account is ₹20,000 × 2/5 = ₹8,000. ₹20,000 is the total excess loss, whereas the second partner’s share is only ₹8,000. Exam tip: Distribute the excess of a claim over its reserve among the old partners in their old ratio.

Correct answer: A. ₹15000

Investment loss is ₹36000 so distributable balance is ₹27000. First partner share is ₹27000 × 5/9 = ₹15000.

Correct answer: A. Debit Capital Reserve and credit Preliminary Expenses then credit balance to old partners

Capital Reserve is profit and Preliminary Expenses are loss to be written off. Net profit ₹33000 is credited to old partners in old ratio.

Correct answer: A. New partner may get claim over old profit

General Reserve is profit before admission. If not distributed the new partner may get unfair benefit of old profit.

Correct answer: A. ₹35,000 credit

The ₹96,000 credit balance in the Profit and Loss Account is an accumulated profit and is distributed among the old partners in the ratio 5:1:2. The ₹40,000 debit balance in Advertisement Suspense represents an accumulated loss, so it is debited to the old partners in the same ratio. A’s net adjustment is ₹96,000 × 5/8 − ₹40,000 × 5/8 = ₹60,000 − ₹25,000 = ₹35,000 credit. ₹60,000 is only A’s share of the accumulated profit; the Advertisement Suspense debit must also be deducted. Exam tip: At admission, accumulated profits and losses are adjusted among the old partners in their old profit-sharing ratio.

Correct answer: A. ₹21,000

After adjusting the claim, the reserve surplus is ₹1,44,000 − ₹60,000 = ₹84,000. This surplus is distributed among the old partners in their old profit-sharing ratio of 7 : 3 : 2. Since the total ratio is 12, the second partner’s share is ₹84,000 × 3/12 = ₹21,000. Therefore, ₹21,000 will be credited to the second partner’s Capital Account. Exam tip: deduct the claim from the reserve first and distribute only the balance in the old profit-sharing ratio; ₹84,000 is the total surplus, not the second partner’s share.

Correct answer: A. ₹8,000

Actual bad debts are ₹58,000, while the available reserve is ₹48,000. Therefore, the excess loss is ₹58,000 − ₹48,000 = ₹10,000. This excess loss is borne by the old partners in their old profit-sharing ratio of 4:1. The first partner’s share is ₹10,000 × 4/5 = ₹8,000, so ₹8,000 is debited to that partner’s account. Exam tip: first calculate the excess over the reserve, then distribute it according to the old profit-sharing ratio.

Correct answer: A. Profit and Loss credit balance accumulated profit

Profit and Loss credit balance is accumulated profit. Debit balance and Preliminary Expenses are debited to old partners like losses.

Correct answer: A. Old partners current accounts

Under fixed capital method capital remains fixed and adjustments go to current accounts. So net profit is credited to old partners current accounts.

Correct answer: A. Old partners capital accounts will be debited

Preliminary Expenses are fictitious asset and are treated as loss when written off. In fluctuating capital the loss is debited directly to old capital accounts.

Correct answer: A. ₹80,000

The combined value of the two reserves is ₹81,000 + ₹63,000 = ₹1,44,000. Since A and B share profits in the old ratio of 5:4, A is entitled to 5/9 of the total amount. Therefore, A’s credit is ₹1,44,000 × 5/9 = ₹80,000. Option B is only A’s share of the General Reserve, whereas option C is the entire combined reserve. Exam tip: Reserves distributed at the time of admission are credited to the old partners in their old profit-sharing ratio.

Correct answer: A. ₹15,000

The probable liability exceeds the Contingency Reserve by ₹21,000: ₹1,26,000 − ₹1,05,000 = ₹21,000. Only this excess is treated as a loss and distributed among the old partners in their 2:5 profit-sharing ratio. The second partner’s share is ₹21,000 × 5/7 = ₹15,000. Therefore, ₹15,000 is debited to that partner’s capital account. Exam tip: When the probable liability is greater than the reserve, distribute only the excess over the reserve among the old partners.

Correct answer: A. Full reserve is distributed among old partners and ₹18000 is separate gain

Increase in investment is gain and the reserve also belongs to old partners. Both are adjusted among old partners in old ratio.

Correct answer: A. ₹60,000

The credit balance of the Profit and Loss Account and the General Reserve represent accumulated profits belonging to the old partners. On the admission of a new partner, these amounts are credited to the old partners’ capital or current accounts in their old profit-sharing ratio. Total accumulated profit = ₹75,000 + ₹45,000 = ₹1,20,000. The third partner’s share is 3/(1+2+3) = 3/6. Therefore, his share = ₹1,20,000 × 3/6 = ₹60,000. Hence, option A is correct. Exam tip: Accumulated profits existing before admission are distributed in the old ratio, not in the new ratio.

Correct answer: A. It will continue as outside liability

Employees Provident Fund is liability towards employees. It is not distributed among partners as accumulated profit.

Correct answer: A. Reserve should go only to A and B in old ratio

General Reserve is part of old profit. It should be distributed only among old partners in old profit ratio.

Correct answer: A. ₹33000

Known bad debts are first deducted from the reserve. Remaining ₹33000 is distributed among old partners in old ratio.

Correct answer: A. ₹12,000 debit

The total of the old ratio is 2 + 6 + 4 = 12. B’s share of the General Reserve is ₹72,000 × 6/12 = ₹36,000 credit. B’s share of the debit balance of the Profit and Loss Account is ₹96,000 × 6/12 = ₹48,000 debit. Therefore, the net effect on B is ₹48,000 debit − ₹36,000 credit = ₹12,000 debit. ₹24,000 is the net debit effect for the entire partnership, not B’s individual effect. Exam tip: Distribute reserves and accumulated profits or losses in the old profit-sharing ratio.

Correct answer: A. ₹30000

Distributable amount is ₹88000 - ₹33000 = ₹55000. Second partner share is ₹55000 × 6/11 = ₹30000.

Correct answer: A. ₹71250

Total distributable amount is ₹90000 + ₹42000 - ₹18000 = ₹114000. First partner share is ₹114000 × 5/8 = ₹71250.

Correct answer: A. Accumulated profit is mistaken as revaluation profit

Profit and Loss credit balance is accumulated profit. It is distributed directly among old partners in old ratio.

Correct answer: A. To keep old rights and obligations limited to old partners

These items belong to the period before admission and relate to old partners. Therefore the new partner is kept separate from them.

Correct answer: A. ₹35,000

The General Reserve is credited to the old partners’ capital accounts, whereas the accumulated loss is debited. Thus, the net credit amount is ₹80,000 − ₹30,000 = ₹50,000. This amount is distributed in the old profit-sharing ratio of 7:2:1. A’s share is ₹50,000 × 7/10 = ₹35,000. Therefore, option A is correct. Option B, ₹56,000, is obtained by distributing only the General Reserve and ignoring the accumulated loss. Exam tip: When a reserve and an accumulated loss appear together, calculate their net effect before applying the old ratio.

Correct answer: A. ₹24000

There is no claim so the reserve is free accumulated profit. First partner share is ₹45000 × 8/15 = ₹24000.

Correct answer: A. It should have been debited to old partners

The direct answer is option A: the debit balance should have been debited to the old partners. A debit balance in Profit and Loss Account represents accumulated loss, not profit. Since the loss belongs to the period before the new partner’s admission, it must be borne by the old partners in their old profit-sharing ratio. Debiting their capital or current accounts reduces their balances and correctly records the burden of the loss. Option A is correct. Option B is wrong because the new partner did not exist as a partner when the loss occurred. Option C is wrong because a debit balance cannot be treated as an addition to General Reserve. Option D is wrong because crediting the old partners was an error: credit increases their accounts, while a loss should decrease them through a debit. No cash transaction is needed. Exam cue: identify the balance first—debit balance means loss, and old loss is debited to old partners.