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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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A and B are partners sharing profits in the old ratio of 3:2. On the admission of a new partner, C, a general reserve of ₹50,000 was wrongly distributed among A, B and C in the new ratio of 2:2:1. How much less or more did A receive than the amount he should have received?

Answer and explanation

Correct answer: ₹10,000 less

A general reserve represents profits earned before C’s admission, so it should be distributed only between the old partners, A and B, in their old ratio of 3:2. A’s correct share = ₹50,000 × 3/5 = ₹30,000. Under the incorrect new ratio of 2:2:1, A received ₹50,000 × 2/5 = ₹20,000. Therefore, A received ₹10,000 less. Exam tip: Reserves and credit balances of the Profit and Loss Account are generally distributed among old partners in the old profit-sharing ratio.

Related tags

Error CorrectionGeneral ReserveAdmission Of PartnerOld RatioNew RatioReservesReconstitution 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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