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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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The old balance sheet shows a debit balance of ₹40,000 in the Profit and Loss Account. A new partner is admitted for a 1/5 share of profits. What will be the new partner’s share in this old debit balance?

Answer and explanation

Correct answer: Zero

The debit balance of the Profit and Loss Account represents an accumulated loss of the period before the new partner’s admission. It is therefore borne by the old partners in their old profit-sharing ratio, and the new partner’s share is zero. Calculating ₹40,000 × 1/5 = ₹8,000 is incorrect because the new partner does not share past losses. Exam tip: Adjust accumulated profits or losses existing before admission only among the old partners.

Related tags

New Partner AdmissionOld Accumulated LossProfit And Loss Debit BalancePartnership ReconstitutionReservesReconstitution 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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