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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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A, B and C share profits in the old ratio of 2:6:4. The General Reserve is ₹72,000 and the debit balance of the Profit and Loss Account is ₹96,000. After adjusting both items in the old ratio, what will be the net effect on B?

Answer and explanation

Correct answer: ₹12,000 debit

The total of the old ratio is 2 + 6 + 4 = 12. B’s share of the General Reserve is ₹72,000 × 6/12 = ₹36,000 credit. B’s share of the debit balance of the Profit and Loss Account is ₹96,000 × 6/12 = ₹48,000 debit. Therefore, the net effect on B is ₹48,000 debit − ₹36,000 credit = ₹12,000 debit. ₹24,000 is the net debit effect for the entire partnership, not B’s individual effect. Exam tip: Distribute reserves and accumulated profits or losses in the old profit-sharing ratio.

Related tags

Admission Of PartnerGeneral ReserveProfit And Loss Debit BalanceOld Profit Sharing RatioNet EffectReservesReconstitution 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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