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Class 12AccountancyReconstitution - Admission of a PartnerReservesExpert
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The Special Insurance Reserve is ₹85,000 and the insurance claim is ₹31,000. The old partners share profits in the ratio 7:6. After adjusting the insurance reserve, what amount will be credited to the second partner’s account?

Answer and explanation

Correct answer: ₹24,923

The insurance claim is first adjusted against the reserve: ₹85,000 − ₹31,000 = ₹54,000. This balance is distributed between the old partners in their old ratio. The second partner’s share is ₹54,000 × 6/13 = ₹24,923.08, or approximately ₹24,923. ₹54,000 is the total balance available for distribution, while ₹29,077 is the first partner’s share. Exam tip: When a reserve is maintained for a specific claim, deduct the claim from the reserve before distributing the surplus among the old partners.

Related tags

Insurance ReserveInsurance ClaimOld RatioAdmission Of PartnerReserve AdjustmentReservesReconstitution 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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