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Subjects
Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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What is the most correct accounting basis for distributing reserves?

Answer and explanation

Correct answer: उपार्जन पुराने काल में हुआ, इसलिए पुराने साझेदारों को अधिकार है

The governing principle is the time-based entitlement to partnership profits. A reserve is created out of profits earned before the admission or reconstitution of a partner. Since the old partners owned and shared the business during that earlier period, the reserve belongs to them and must be credited to their capital or current accounts in the old profit-sharing ratio. Its presentation on the liabilities side does not make it an outside liability; it is an internal claim of the partners. The new partner is entitled only to profits earned after admission, and the new ratio governs future profits rather than past reserves. Therefore option A states the correct accounting basis.

Related tags

Reserve DistributionOld PartnersAccounting PrincipleProfit-Sharing RatioReservesReconstitution 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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