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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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A, B and C are old partners sharing profits in the ratio of 3:4:5. The General Reserve is ₹1,44,000 and the Profit and Loss Account has a debit balance of ₹24,000. On the admission of a new partner, what will be the net effect on B’s Capital Account?

Answer and explanation

Correct answer: ₹40,000 credit

The General Reserve is an accumulated profit and is credited to the old partners in their old profit-sharing ratio. The debit balance of the Profit and Loss Account represents an accumulated loss and is debited in the same ratio. Net amount to be adjusted = ₹1,44,000 − ₹24,000 = ₹1,20,000. B’s share = ₹1,20,000 × 4/12 = ₹40,000, so B’s account will be credited by ₹40,000. Exam tip: subtract an accumulated loss from the reserve before distributing the net amount; do not distribute the reserve alone.

Related tags

AccountancyAdmission Of PartnerReservesProfit And Loss Debit BalanceOld RatioCapital Account AdjustmentReconstitution Admission Of A PartnerClass 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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