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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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A partnership firm has a Contingency Reserve of ₹88,000. Out of this reserve, ₹52,000 is required to be set aside for an estimated liability. The remaining amount is distributed in the old profit-sharing ratio of 2:3. How much will be received by the first partner?

Answer and explanation

Correct answer: ₹14,400

After setting aside ₹52,000 for the estimated liability, the balance of the reserve is ₹88,000 − ₹52,000 = ₹36,000. The old ratio of 2:3 has 5 total parts, so the first partner’s share is ₹36,000 × 2/5 = ₹14,400. ₹21,600 is the second partner’s share, whereas ₹36,000 is the total balance available for distribution. Exam tip: First deduct the amount required for the liability, and then distribute the remaining reserve in the old ratio.

Related tags

Contingency ReserveEstimated LiabilityOld Profit Sharing RatioAdmission Of PartnerPartnership AccountsReservesReconstitution 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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