The reserve fund is ₹70,000 and advertisement suspense expenditure is ₹25,000. What will be the net profit amount for the old partners after adjustment?

Correct answer: ₹45,000

The reserve fund of ₹70,000 represents accumulated profit, whereas advertisement suspense expenditure of ₹25,000 represents an accumulated loss. Therefore, net profit = ₹70,000 − ₹25,000 = ₹45,000. ₹95,000 would result from adding both amounts, which is incorrect because the expenditure must be deducted from the profit. In the examination, add profit items and deduct accumulated losses or expenses.