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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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A, B and C share profits in the ratio 3:2:1. The Profit and Loss Account has a credit balance of ₹72,000, and Advertisement Suspense Account has a debit balance of ₹30,000. On admission of a new partner, what will be C’s net share?

Answer and explanation

Correct answer: ₹7,000 credit

The debit balance of Advertisement Suspense must be deducted from the accumulated profit. Thus, net accumulated profit = ₹72,000 − ₹30,000 = ₹42,000. Since the total profit-sharing ratio is 6, C’s share is 1/6. Therefore, C’s share is ₹42,000 × 1/6 = ₹7,000 credit. ₹12,000 is incorrect because it ignores the Advertisement Suspense debit balance. Exam tip: Deduct debit balances from credit reserves before distributing the net amount among the partners.

Related tags

Profit And Loss AccountAdvertisement SuspenseAdmission Of PartnerReservesProfit Sharing RatioReconstitution 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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