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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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An old balance sheet shows Reserve Fund of ₹1,60,000 and Reserve Fund Investment of ₹1,60,000. What is the correct treatment on admission of a partner?

Answer and explanation

Correct answer: Reserve Fund is distributed among old partners and the investment remains an asset

Reserve Fund and Reserve Fund Investment are two separate accounting items. The Reserve Fund represents accumulated profit and, on admission, is distributed among the old partners in their old profit-sharing ratio. The investment is an asset of the firm and continues to appear unless it is specifically sold or revalued. Hence option A is correct; the other treatments confuse the reserve with its investment.

Related tags

Reserve FundReserve Fund InvestmentAdmission Of PartnerAsset TreatmentReservesReconstitution 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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