Reserves

The debit balance of the Profit and Loss Account and preliminary expenses are both debit items to be written off among the old partners. Thus, the total debit is ₹42,000 + ₹30,000 = ₹72,000. The first partner’s share is ₹72,000 × 5/9 = ₹40,000. ₹72,000 is the total debit, not the amount charged to the first partner. Exam tip: Write off such debit items among old partners in their old profit-sharing ratio.

The surplus in the Bad Debts Reserve is ₹42,000 − ₹18,000 = ₹24,000. This amount is distributed among the old partners in the ratio of 6:4. Therefore, the second partner’s share is ₹24,000 × 4/10 = ₹9,600. ₹18,000 represents the actual bad debts, not the amount to be credited. Exam tip: Always deduct the actual loss from the reserve before distributing the balance.

Accumulated loss has debit balance so it is credited to close it. Old partners capital reduces so it is debited.

If there is no claim against special reserve it is like free accumulated profit. Therefore it is distributed among old partners.

General Reserve is credited to all partners in the old profit-sharing ratio, whereas the debit balance of Advertisement Suspense is debited in the same ratio. Thus, the net amount is ₹108,000 − ₹36,000 = ₹72,000. C’s share is 2/12, so C’s net credit is ₹72,000 × 2/12 = ₹12,000. Exam tip: First find the net reserve adjustment, then apply each partner’s old profit-sharing fraction.

Correct shares are ₹64000 and ₹40000 but equal sharing gives ₹52000 each. The first partner received ₹12000 less.

The Capital Reserve provides a credit of ₹1,30,000, while the debit balance of the Profit and Loss Account must be deducted. Thus, the net amount is ₹1,30,000 − ₹60,000 = ₹70,000. A’s share in the old ratio is 4/10, so the credit to A’s Capital Account is ₹70,000 × 4/10 = ₹28,000. ₹70,000 is the total net amount, not A’s individual share. Exam tip: Deduct accumulated losses from reserves first, then distribute the balance in the old profit-sharing ratio.

The General Reserve is credited to the old partners in the old ratio, whereas Preliminary Expenses are written off in that ratio. Thus, the net amount is ₹91,000 − ₹26,000 = ₹65,000. B’s share is ₹65,000 × 6/13 = ₹30,000. Therefore, B’s capital account receives a net credit of ₹30,000. Exam tip: Adjust debit items such as preliminary expenses against the reserve before distributing the net amount among the old partners.

When there is no related liability such reserve is treated like free accumulated profit. B share is ₹90000 × 5/15 = ₹30000.

The investment loss of ₹46,000 is first adjusted against the Investment Fluctuation Reserve of ₹70,000, leaving a balance of ₹24,000. This balance is distributed between the old partners in the ratio 4:3. Therefore, the first partner’s share = ₹24,000 × 4/7 = ₹13,714.29, or approximately ₹13,714. ₹24,000 is the total balance available for distribution, not the first partner’s share. Exam tip: Deduct the loss from the reserve first, then distribute the remaining balance in the old profit-sharing ratio.

The General Reserve provides a credit of ₹1,26,000, while the Profit and Loss debit balance must be deducted. Thus, net accumulated profit = ₹1,26,000 − ₹54,000 = ₹72,000. The first partner’s share is 3/(3+2+1) = 3/6, so the net credit is ₹72,000 × 3/6 = ₹36,000. ₹72,000 is the total net amount, not the first partner’s individual share. Exam tip: Always deduct the debit balance from the reserve before distributing the net amount in the old ratio.

After adjusting the claim, the surplus reserve is ₹1,10,000 − ₹80,000 = ₹30,000. This surplus is distributed among the old partners in their old ratio of 2:3:5. The third partner’s share is 5/10, so the amount credited is ₹30,000 × 5/10 = ₹15,000. ₹30,000 is the total surplus, not the third partner’s individual share. Exam tip: When a reserve exceeds the related claim, distribute the surplus among the old partners in their old profit-sharing ratio.

The shortfall between the actual liability and the Contingency Reserve is ₹91,000 − ₹78,000 = ₹13,000. This additional loss is shared by A and B in the ratio 9:4. Therefore, B’s share = ₹13,000 × 4/13 = ₹4,000. ₹13,000 is the total additional loss, not B’s share alone. Exam tip: First calculate the excess liability over the reserve, and then apply the concerned partner’s profit-sharing fraction.

The net adjustment is a credit of ₹36,000, calculated as ₹96,000 General Reserve minus ₹60,000 Preliminary Expenses. B’s share is 4/12, so his net credit is ₹36,000 × 4/12 = ₹12,000. ₹32,000 represents B’s share of the General Reserve alone and ignores the debit for Preliminary Expenses. Exam tip: combine credits such as reserves and accumulated profits, deduct write-offs, and then distribute the net amount in the old profit-sharing ratio.

Accumulated profit belongs to the period before admission and only old partners have the right. Including new partner is wrong.

The actual bad debts of ₹42,000 are adjusted against the Bad Debts Reserve of ₹72,000, leaving ₹30,000. This balance is distributed among the old partners in the ratio 4:5. Therefore, the second partner’s share = ₹30,000 × 5/9 = ₹16,666.67, or approximately ₹16,667. ₹30,000 is the total balance, while ₹42,000 is the amount adjusted as bad debts. Exam tip: First deduct the actual bad debts from the reserve, then distribute the balance in the old partners’ profit-sharing ratio.

The ₹70,000 credit balance in the Profit and Loss Account offsets part of the accumulated loss of ₹90,000. Thus, the net loss is ₹90,000 − ₹70,000 = ₹20,000. A’s share in the old ratio of 6:4 is ₹20,000 × 6/10 = ₹12,000, so A’s account will be debited by ₹12,000. Exam tip: a net loss is debited to the partners’ accounts, whereas a net profit is credited.

The insurance claim is first adjusted against the reserve: ₹85,000 − ₹31,000 = ₹54,000. This balance is distributed between the old partners in their old ratio. The second partner’s share is ₹54,000 × 6/13 = ₹24,923.08, or approximately ₹24,923. ₹54,000 is the total balance available for distribution, while ₹29,077 is the first partner’s share. Exam tip: When a reserve is maintained for a specific claim, deduct the claim from the reserve before distributing the surplus among the old partners.

Employees Provident Fund is outside liability so it is not distributed. Only General Reserve ₹50000 goes to old partners.

The Capital Reserve of ₹90,000 represents accumulated profit, whereas the debit balance of ₹12,000 in the Profit and Loss Account represents accumulated loss. Thus, net accumulated profit = ₹90,000 − ₹12,000 = ₹78,000. C’s share in the ratio 1:2:3 is 3/6, so the amount credited to C is ₹78,000 × 3/6 = ₹39,000. ₹78,000 is the total net amount, not C’s individual share. Exam tip: Deduct the debit balance from the reserve before distributing the net amount among the old partners.