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Class 12AccountancyReconstitution - Admission of a PartnerReservesHard
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A partnership firm has a Reserve Fund of ₹81,000 and a Capital Reserve of ₹45,000. On the admission of a new partner, these amounts are to be distributed between the old partners, A and B, in their old profit-sharing ratio of 4:5. What total amount will be credited to A’s Capital Account?

Answer and explanation

Correct answer: ₹56,000

Both the Reserve Fund and Capital Reserve represent accumulated profits belonging to the old partners, so they are distributed in the old ratio. Total amount = ₹81,000 + ₹45,000 = ₹1,26,000. A’s share = 4/(4+5) × ₹1,26,000 = 4/9 × ₹1,26,000 = ₹56,000. Therefore, ₹56,000 will be credited to A’s Capital Account. Exam tip: On admission, accumulated profits are distributed among the old partners in their old ratio, not in the new ratio.

Related tags

Reserve FundCapital ReserveAdmission Of PartnerOld Profit Sharing RatioAccumulated ProfitsReservesReconstitution 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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