Practicing Success
Practicing Success
CUET Preparation Today
A, B & C are partners sharing profits in the ratio of 5:4:1. Their capital accounts showing balance of ₹300000, ₹150000, ₹150000 respectively. It is decided between partners that they will share future profits equally. Firm has the following information- |
How will general reserve be treated? |
Debit to all partner's account Credit to all partner's account Debit to gaining partner's account Credit to gaining partner's account |
Credit to all partner's account |
If a firm may have accumulated profits in the form of a general reserve, reserve, and/or credit balance of the Profit and Loss Account. When a new partner joins the firm, they do not have any entitlement to a share in these accumulated profits. Instead, these profits are distributed among the existing partners by transferring them to their capital current accounts, based on the old profit-sharing ratio. Partner's account is credited for the profit share. So, all the 3 (A,B,C) partners got 20000, 16000, 4000 respectively. |
