Question

Amit, Rama and Chandar are partners in a firm sharing profits and losses in the ratio of 2:2:1. Chandar retires from the business. The General Reserve stands at Rs.10,000 on the date of Chandar’s retirement. You are required to pass the necessary journal entry for the distribution of General Reserve if 

(a) The General Reserve is not allowed to be kept in the books. 

(b) The General Reserve is kept only at an amount remaining after giving Chandar his share. 

(c) The General Reserve is allowed to kept at the full value.

Answer 1

Date	Particulars	Dr.	Cr.
(a)	General Reserve A/c Dr	10,000
	To Amit’s Capital A/c		4,000
	To Rama’s Capital A/c		4,000
	To Chandar’s Capital A/c		2,000
	(for General Reserve distributed among the partners)
(b)	General Reserve A/c Dr	2,000
	To Chandar’s Capital A/c		2,000
	(for Chandar’s share of General reserve credited to his account)
c)	Amit’s Capital A/c Dr.	1,000
	Rama’s Capital A/c Dr	1,000
	To Chandar’s Capital A/c		2,000
	(for remaining partners’ capital account adjusted for chandar’s share of General reserve)