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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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Accumulated profit is ₹66000 and accumulated loss is ₹84000. In the old partnership ratio of 5:4, what will be the net effect on the first partner?

Answer and explanation

Correct answer: Debit ₹10000

The accumulated loss exceeds the accumulated profit by ₹18000, so the net effect is a loss of ₹18000. Under the old ratio of 5:4, the first partner’s share is \(\frac{5}{9} \times ₹18000 = ₹10000\). A loss is debited to the partner’s Capital Account, so the correct effect is a debit of ₹10000. The ₹10000 credit option reverses the accounting treatment. Exam tip: First determine the net profit or loss, and then distribute it in the old ratio.

Related tags

Net Accumulated LossOld RatioPartner Capital AccountReservesReconstitutionReconstitution 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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