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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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A and B share profits and losses in the ratio of 6:4. The Profit and Loss Account has a credit balance of ₹70,000, while the accumulated loss is ₹90,000. What will be the net effect on A at the time of reconstitution?

Answer and explanation

Correct answer: ₹12,000 debit

The ₹70,000 credit balance in the Profit and Loss Account offsets part of the accumulated loss of ₹90,000. Thus, the net loss is ₹90,000 − ₹70,000 = ₹20,000. A’s share in the old ratio of 6:4 is ₹20,000 × 6/10 = ₹12,000, so A’s account will be debited by ₹12,000. Exam tip: a net loss is debited to the partners’ accounts, whereas a net profit is credited.

Related tags

Profit And Loss AccountAccumulated LossReconstitutionOld Profit Sharing RatioPartner CapitalReservesReconstitution 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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