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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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The Capital Reserve is ₹72,000 and Preliminary Expenses are ₹27,000. After the net adjustment of these items, how much will be credited to the capital account of the second old partner in the ratio of 5:4?

Answer and explanation

Correct answer: ₹२०,०००

Capital Reserve is credited, whereas Preliminary Expenses are debited when written off. Therefore, the net adjustment is ₹72,000 − ₹27,000 = ₹45,000. The second partner’s share is 4/9, so the amount credited is ₹45,000 × 4/9 = ₹20,000. The ₹25,000 option results from using an incorrect proportion instead of 4:9. Exam tip: First calculate the net reserve adjustment, then distribute it among the old partners in their profit-sharing ratio.

Related tags

Capital ReservePreliminary ExpensesNet AdjustmentOld PartnersProfit Sharing RatioReservesReconstitution 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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