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Class 12AccountancyReconstitution - Admission of a PartnerReservesMedium
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A and B share profits and losses in the ratio of 5:2. The General Reserve is ₹84,000, and the Advertisement Suspense Account has a debit balance of ₹28,000. What net credit will be given to B’s Capital Account?

Answer and explanation

Correct answer: ₹16,000

The General Reserve is credited by ₹84,000, while the debit balance of the Advertisement Suspense Account is adjusted by debiting ₹28,000. Therefore, the total net amount is ₹84,000 − ₹28,000 = ₹56,000. B’s share under the old ratio is 2/7, so the net credit to B’s Capital Account is ₹56,000 × 2/7 = ₹16,000. ₹56,000 is the total net adjustment, not B’s individual share. Exam tip: Credit reserves and debit accumulated losses or debit-balance items before distributing the net amount in the old profit-sharing ratio.

Related tags

Net CreditGeneral ReserveAdvertisement SuspenseOld Profit Sharing RatioAdmission Of PartnerReservesReconstitution 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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