At the time of admission of a new partner, the old profit-sharing ratio is 9:6. The General Reserve is ₹75,000 and Preliminary Expenses are ₹45,000. What will be the net effect on the first partner after adjustment in the old ratio?

Correct answer: Credit ₹18,000

The General Reserve is distributed in the old ratio, so the first partner receives a credit of ₹75,000 × 9/15 = ₹45,000. Preliminary Expenses are written off, so his share is debited by ₹45,000 × 9/15 = ₹27,000. Therefore, the net effect is ₹45,000 − ₹27,000 = ₹18,000 credit. The ₹45,000 credit would result only if the preliminary expenses were ignored. Exam tip: credit items that give partners a benefit and debit items that are written off.