If, at the time of admission of a new partner, profit and loss account appears in the books, it will be transferred to:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Old Partners Capital account
A credit balance of the profit and loss account in the balance sheet is profit earned before the new partner joined. He has no right to it, so it is transferred to the old partners’ capital accounts in their old profit sharing ratio. A debit balance (an accumulated loss) is treated the same way.
Why the other options are incorrect
Option (1) All the partners — Incorrect. “All the partners” would include the new partner, who has no share in past profits.
Option (2) New partner only — Incorrect. The new partner is the one person who gets none of it.
Option (4) Old and new Partners — Incorrect. The same mistake as Option (1): the new partner is left out.
NCERT (2026-27 edition): |