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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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The Dividend Equalisation Reserve is ₹48,000 and the debit balance of the Profit and Loss Account is ₹18,000. If A and B share profits in the ratio 1:2, what will be the net effect in B’s account?

Answer and explanation

Correct answer: Credit ₹20,000

The Dividend Equalisation Reserve has a credit balance of ₹48,000, while the debit balance of the Profit and Loss Account must be deducted. Thus, the net amount is ₹48,000 − ₹18,000 = ₹30,000 credit. B’s share in the old ratio of 1:2 is ₹30,000 × 2/3 = ₹20,000 credit. Exam tip: First calculate the net reserve after adjusting the debit balance, and then distribute it among the partners in their old ratio.

Related tags

Dividend Equalisation ReserveProfit And Loss Debit BalanceNet EffectOld Profit Sharing RatioAdmission Of PartnerReservesReconstitution 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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