A, B and C share profits in the ratio 1:2:3. On the admission of a new partner, the Capital Reserve is ₹90,000 and the Profit and Loss Account has a debit balance of ₹12,000. What net amount will be credited to C’s account?

Correct answer: ₹39,000

The Capital Reserve of ₹90,000 represents accumulated profit, whereas the debit balance of ₹12,000 in the Profit and Loss Account represents accumulated loss. Thus, net accumulated profit = ₹90,000 − ₹12,000 = ₹78,000. C’s share in the ratio 1:2:3 is 3/6, so the amount credited to C is ₹78,000 × 3/6 = ₹39,000. ₹78,000 is the total net amount, not C’s individual share. Exam tip: Deduct the debit balance from the reserve before distributing the net amount among the old partners.