At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:

Old partners in old profit sharing ratio

The correct answer is Option (1) → Old partners in old profit sharing ratio

When a new partner is admitted, the partnership firm is reconstituted. Any undistributed profits (like General Reserve, Profit and Loss Account credit balance, or Workmen Compensation Reserve balance exceeding the liability) appearing in the Balance Sheet belong to the partners from the period before the new partner was admitted.

Therefore, these accumulated profits are transferred to the capital accounts of the Old Partners in their Old Profit Sharing Ratio to settle their claims before the new partnership agreement takes effect.