Reserves

The direct answer is option A. Accumulated profit is profit earned before the new partner enters. It belongs to the old partners because they worked for and earned it before reconstitution. Therefore, it is transferred to the old partners in their old profit-sharing ratio. The sacrificing ratio is used mainly for goodwill adjustment when an old partner gives up part of his share for the new partner; it is not the normal basis for distributing an already accumulated reserve. Option A is correct. Option B is wrong because the sacrificing ratio can be calculated when needed; it is not the reason accumulated profit is distributed differently. Option C is wrong because the new partner did not earn the pre-admission profit. Option D is wrong because accumulated profit is not a cash expense; it is a past profit represented in the accounts. Memory cue: pre-admission profit follows the old ratio; goodwill compensation follows the sacrificing ratio.

Accumulated loss relates to old business period. Therefore it is shared in old profit sharing ratio.

First partner's correct loss was ₹18000 but equal sharing debited ₹22500. So he was debited ₹4500 more.

Both preliminary expenses and advertisement suspense expenditure are accumulated losses or fictitious assets that must be written off among the old partners. Their total is ₹36,000 + ₹24,000 = ₹60,000. Since the old ratio is 5:1, the first partner’s share is /6 of the total. Thus the debit is ₹60,000 × 5/6 = ₹50,000, so choice A is correct.

The remaining ₹10,000 belongs to the second partner. The new ratio is not used because these expenses relate to the period before reconstitution. A common mistake is to debit the first partner with the full ₹60,000, but accounting distributes the loss in the old ratio. Therefore ₹50,000 is the correct amount for the first partner.

The insurance claim must first be adjusted against the Insurance Reserve. Remaining Insurance Reserve = ₹52,000 − ₹22,000 = ₹30,000. In the old ratio of 3:2, the second partner’s share is 2/5. Therefore, his share is ₹30,000 × 2/5 = ₹12,000. ₹30,000 is the total balance available for distribution, not the second partner’s individual share. Exam tip: subtract the claim first, then distribute the balance in the old ratio.

The insurance claim is ₹39,000, whereas the Insurance Reserve is only ₹26,000. The reserve will first absorb ₹26,000, leaving an additional loss of ₹13,000. Therefore, ₹13,000 will be debited to the Revaluation Account, and the loss will be borne by the old partners in their old profit-sharing ratio. Option B is incorrect because a claim exceeding the reserve results in a loss, not a gain. Exam tip: when a claim exceeds the related reserve, record the excess as a revaluation loss.

The General Reserve of ₹80,000 represents accumulated profit, whereas the ₹95,000 debit balance of the Profit and Loss Account represents accumulated loss. After adjustment, ₹95,000 − ₹80,000 = ₹15,000 remains as net accumulated loss. This amount is debited to the old partners’ capital or current accounts in their old profit-sharing ratio; the incoming partner is not entitled to it. Exam tip: Set off a credit-balance reserve against the debit balance of accumulated loss to find the net amount.

The Reserve Fund represents accumulated profit earned by the old partners. Therefore, on the admission of a new partner, it is transferred to the old partners’ Capital Accounts in their old profit-sharing ratio. The existence of separate investments of an equal amount does not change this treatment, because the investments are real assets and are not distributed merely because their value matches the Reserve Fund. Hence, option B is incorrect. Exam tip: Distribute accumulated profits or reserves among the old partners, but adjust the related asset only when its sale, revaluation, or distribution is specifically required.

Both amounts are distributable accumulated profits of the old partners. The General Reserve is ₹81,000 and the distributable balance of Workmen Compensation Reserve is ₹9,000, so the total amount to be distributed is ₹90,000. The old ratio is 4:5, giving nine total parts. The first partner’s entitlement is therefore 4/9 × ₹90,000 = ₹40,000. Option A is correct. ₹36,000 would apply an incorrect fraction, ₹90,000 is the total distributable amount for both partners, and ₹50,000 does not follow from the ratio. The new partner receives no share in these past accumulated amounts.

The Investment Fluctuation Reserve gives a credit of ₹28,000 to the old partners, while writing off Preliminary Expenses causes a debit of ₹7,000. Therefore, the net credit is ₹28,000 − ₹7,000 = ₹21,000. The second partner’s share is 2/7 of this amount, based on the old ratio of 5:2: ₹21,000 × 2/7 = ₹6,000 credit. ₹21,000 is the total net effect for all old partners, not the second partner alone; hence option D is incorrect. Exam tip: Calculate the total net adjustment first, then distribute it in the old profit-sharing ratio.

The correct answer is A: the entire reserve is shared among the old partners in the old ratio. A specific reserve is normally kept to meet a related possible claim. If the claim is zero, there is no liability to use it for. It therefore becomes available accumulated profit for the old partners. Option A is correct. Option B is wrong because the reserve was created before the new partner entered. Option C is wrong because there is no revaluation loss merely because the claim is absent. Option D is wrong because ignoring the reserve would leave an existing credit balance untreated. The distribution is made in the old ratio, not the new ratio. Memory cue: no claim means reserve released to old partners.

Balance after claim is like old accumulated profit. Therefore it is shared among old partners in old ratio.

Excess claim is an additional pre-admission liability. It can be taken as loss in Revaluation Account.

General Reserve represents profits accumulated by the old partners before the new partner’s admission. Therefore, the reserve of ₹1,20,000 is distributed only among the old partners in their old profit-sharing ratio, and the incoming partner receives no share from it. ₹24,000 is obtained by incorrectly applying the new partner’s 1/5 share to the reserve. Exam tip: Pre-admission accumulated profits, such as General Reserve and the credit balance of the Profit and Loss Account, are adjusted among the old partners before admission.

The debit balance of the Profit and Loss Account represents an accumulated loss relating to the period before the new partner’s admission. The new partner shares only in profits and losses arising after admission according to the agreed ratio, so the new partner has no share in this past loss. Therefore, the correct answer is ₹0. The amount ₹12,500 is incorrect because applying 1/4 to ₹50,000 would wrongly extend the future-profit ratio to an old loss. Exam tip: Accumulated profits or losses existing at admission are transferred to the old partners in their old profit-sharing ratio.

B’s share in the old ratio is 3/10. B is credited with 3/10 of the accumulated profits (₹1,50,000 × 3/10 = ₹45,000) and debited with 3/10 of the accumulated losses (₹70,000 × 3/10 = ₹21,000). The net effect is a credit of ₹45,000 − ₹21,000 = ₹24,000, so option A is correct.

Under fixed capital method such adjustments are made in current accounts. In exams read the capital method carefully.

Old profits and losses belong before the new partner joins. Therefore their effect goes to old partners in old ratio.

The General Reserve represents accumulated profit and is credited to the old partners’ capital accounts in their old profit-sharing ratio. The debit balance of the Profit and Loss Account is adjusted against this reserve: ₹1,25,000 − ₹35,000 = ₹90,000. B’s share is 3/5, so the net credit is ₹90,000 × 3/5 = ₹54,000. Exam tip: deduct the debit balance before applying the old ratio; applying the ratio directly to ₹1,25,000 gives an incorrect result.

The governing concept is that an undistributed reserve is credited to the old partners, while an accumulated fictitious expense such as Preliminary Expenses is debited to them in the old ratio. First calculate the net amount: Reserve Fund ₹168,000 minus Preliminary Expenses ₹48,000 equals ₹120,000 of net accumulated profit. The first partner’s old-ratio share is 5/12. Thus, ₹120,000 × 5/12 = ₹50,000. Therefore, the first partner receives a net credit of ₹50,000, making option A correct. ₹70,000 is the second partner’s share, ₹20,000 ignores the reserve, and ₹120,000 is the total net amount rather than the first partner’s share.

The balance remaining after adjusting the claim is ₹1,40,000 − ₹92,000 = ₹48,000. The old ratio 7:5 has 12 total parts, so the second partner is entitled to 5/12 of the balance. Therefore, the amount received is ₹48,000 × 5/12 = ₹20,000. ₹28,000 is the first partner’s share, based on 7/12. In the examination, first deduct the claim from the reserve and then distribute the balance in the old ratio.

The claim exceeds the reserve by ₹23000. The excess claim is debited to Revaluation Account like a pre-admission loss.

Fall in investments is ₹55000 and it will be adjusted from the reserve. Balance ₹30000 will be shared among old partners.

The governing concept is that Investment Fluctuation Reserve is used to absorb a fall in the value of investments, but only up to the amount available in the reserve. First calculate the total fall: ₹190,000 − ₹145,000 = ₹45,000. The reserve covers ₹28,000 of this fall. The uncovered or excess loss is therefore ₹45,000 − ₹28,000 = ₹17,000. This remaining amount is treated as a loss through revaluation or the relevant adjustment account. Hence option A is correct. Option B is only the reserve amount, option C is the total fall before using the reserve, and option D incorrectly assumes that the reserve covers the entire decline.

There is no fall in investments so the reserve is not needed. The full reserve is shared among old partners like old profit.