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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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A, B and C share old profits in the ratio 3:2:1. The Profit and Loss Account has a credit balance of ₹72,000, and Advertisement Suspense Expenditure is ₹18,000. On admission of a new partner, what net credit should be given to B?

Answer and explanation

Correct answer: ₹18,000

The Profit and Loss Account credit balance is ₹72,000, while Advertisement Suspense Expenditure is a debit or loss item of ₹18,000. Therefore, net accumulated profit = ₹72,000 − ₹18,000 = ₹54,000. B’s share under the old ratio is \(2/6\), so B’s credit = ₹54,000 × \(2/6\) = ₹18,000. Exam tip: first adjust the credit balance for the debit item, and then distribute the net amount in the old profit-sharing ratio.

Related tags

Profit And Loss CreditAdvertisement SuspenseOld Profit Sharing RatioAdmission Of PartnerReservesReconstitution Admission Of A PartnerAccountancyClass 12 Mcq
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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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