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Class 12AccountancyReconstitution - Admission of a PartnerReservesEasy
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The old balance sheet shows a general reserve of ₹75,000 and a debit balance of ₹15,000 in the Profit and Loss Account. What is the net accumulated profit based on these items?

Answer and explanation

Correct answer: ₹60,000

General reserve represents accumulated profit, whereas a debit balance in the Profit and Loss Account represents accumulated loss. Therefore, net accumulated profit = ₹75,000 − ₹15,000 = ₹60,000. Hence, option A is correct. Exam tip: subtract a debit balance representing loss from the reserve; do not add it.

Related tags

Net Accumulated ProfitGeneral ReserveProfit And Loss AccountDebit BalanceReconstitutionReservesReconstitution Admission Of A PartnerAccountancy
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10 more MCQs
  1. 1At the time of admission of a new partner to whom is general reserve given?
  2. 2At the time of admission how is credit balance of Profit and Loss Account treated?
  3. 3At the time of admission what does debit balance of Profit and Loss Account show?
  4. 4A and B share profits in the old ratio of 3:2. At the time of admission of a new partner, the general reserve is ₹50,000. How much will A receive from the general reserve?
  5. 5X and Y are partners sharing profits in the old ratio of 4:1. The firm's reserve fund is ₹25,000. On reconstitution of the partnership, what share of the reserve fund will Y receive?
  6. 6Why does the new partner not receive a share of the old General Reserve?
  7. 7Which is the correct journal entry for distributing general reserve?
  8. 8Which entry is made for writing off debit balance of Profit and Loss Account?
  9. 9Profit and Loss Account has credit balance ₹30000. A and B share in 2:1. How much will be credited to B?
  10. 10A firm's Profit and Loss Account has a debit balance of ₹18,000. Partners A and B share profits and losses in the old ratio of 5:4. What amount will be debited to A's Capital Account?
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