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Class 12AccountancyReconstitution - Admission of a PartnerReservesEasy
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A firm has a Contingency Reserve of ₹50000, against which an expected liability of ₹38000 is estimated. On the admission of a new partner, what balance of the reserve will be distributed among the old partners?

Answer and explanation

Correct answer: ₹12000

₹38000 must be retained to meet the expected liability. Therefore, the balance distributed among the old partners is ₹50000 − ₹38000 = ₹12000. This amount is adjusted in the old partners’ capital or current accounts in their old profit-sharing ratio. Exam tip: Always deduct the liability from the reserve before distributing the balance.

Related tags

Contingency ReserveExpected LiabilityAdmission Of PartnerReservesReconstitutionReconstitution Admission Of A PartnerAccountancyClass 12 Mcq
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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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