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CMA Intermediate · Financial Accounting · Dissolution of Partnership Firms including Piecemeal Distribution

Mohan and Sohan share profits and losses in the ratio 3:2. Their capitals are Rs 50,000 and Rs 30,000, and the general reserve is Rs 20,000. The firm has paid all outside liabilities and has Rs 20,000 cash from the first realisation to distribute using the proportionate capital method, with the capital ratio taken after adjusting the reserve. How much does Mohan receive?

Mohan receives Rs 12,400. The reserve of Rs 20,000 is first shared 3:2, making adjusted capitals Rs 62,000 and Rs 38,000, a ratio of 31:19. Applying this ratio to the Rs 20,000 of cash gives Mohan 31/50 of it.

  1. ARs 10,000
  2. BRs 12,000
  3. CRs 12,400Correct
  4. DRs 12,500

Explanation

Reserve is credited in the profit ratio: Mohan 12,000 and Sohan 8,000. Adjusted capitals are 62,000 and 38,000, a ratio of 31:19. Mohan receives 20,000 x 31/50 = 12,400. Rs 12,500 ignores the reserve (50:30), while Rs 12,000 uses the profit ratio.

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