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A firm has a General Reserve of ₹90,000 and a Dividend Equalisation Reserve of ₹30,000. On the admission of a new partner, if these reserves are to be distributed in the old ratio of 5:3, what total amount will be received by the second partner?

Answer and explanation

Correct answer: ₹45,000

The combined amount of the two reserves is ₹90,000 + ₹30,000 = ₹1,20,000. Under the old ratio of 5:3, the second partner’s share is 3/8. Therefore, his share is ₹1,20,000 × 3/8 = ₹45,000. ₹75,000 represents the first partner’s 5/8 share, not the second partner’s share. In the exam, first combine all reserves and then apply the relevant partner’s fraction of the old ratio.

Related tags

Multiple ReservesDividend Equalisation ReserveOld RatioAdmission Of PartnerReserve DistributionReservesReconstitution Admission Of A PartnerAccountancy

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