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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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A, B and C share profits and losses in the ratio 3:5:4. The Contingency Reserve is ₹96,000, while the actual liability is determined to be ₹36,000. After this adjustment, what amount will be credited to B’s Capital Account?

Answer and explanation

Correct answer: ₹25,000

The distributable surplus is obtained after providing for the actual liability: ₹96,000 − ₹36,000 = ₹60,000. This surplus is distributed in the old ratio 3:5:4, whose total is 12. Therefore, B’s share is ₹60,000 × 5/12 = ₹25,000. ₹60,000 is the total distributable surplus, not B’s individual share. Exam tip: In reserve adjustments, first deduct the actual liability and then distribute the balance in the old profit-sharing ratio.

Related tags

Contingency ReserveActual LiabilityOld Profit Sharing RatioReserve AdjustmentAdmission Of PartnerReservesReconstitution 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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