Old partners share 1:1:2. Profit and Loss credit balance is ₹60,000 and Preliminary Expenses are ₹20,000. What is the third partner's net credit?

Correct answer: ₹20,000

The governing concept is the treatment of accumulated profits and fictitious assets at the time of reconstitution. The Profit and Loss credit balance represents accumulated profit of ₹60,000, whereas Preliminary Expenses are an unprovided fictitious asset of ₹20,000 and must be written off. Therefore, the net amount available for distribution is ₹60,000 − ₹20,000 = ₹40,000. The old partners’ ratio is 1:1:2, whose total is 4 parts. The third partner has 2 parts, so the credit due is ₹40,000 × 2/4 = ₹20,000. Thus option B is correct. ₹10,000 represents only one-fourth of the net amount, ₹30,000 does not follow the ratio, and ₹40,000 is the total net balance rather than the third partner’s share.