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Class 12AccountancyReconstitution - Admission of a PartnerReservesMedium
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The Profit and Loss Account of a partnership firm has a debit balance of ₹36,000. The old partners A and B share profits and losses in the ratio of 7:5. At the time of reconstitution, what amount will be debited to partner A’s Capital Account?

Answer and explanation

Correct answer: ₹21,000

A debit balance in the Profit and Loss Account represents an accumulated loss, which is borne by the old partners in their old profit-sharing ratio. A’s share = ₹36,000 × 7/(7+5) = ₹21,000; therefore, ₹21,000 will be debited to A’s Capital Account. ₹36,000 is the total loss, while ₹15,000 is B’s share. Exam tip: For an accumulated loss, use the old partners’ old profit-sharing ratio.

Related tags

Profit And Loss DebitAccumulated LossOld Profit Sharing RatioPartner Capital AccountReconstitutionReservesReconstitution 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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