Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Admission of a Partner

Question:

General Reserve at the time of admission of a new partner is transferred to which account?

Options:

Revaluation Account

Old Partner's Capital Account

Profit and Loss Adjustment Account

Realisation Account

Correct Answer:

Old Partner's Capital Account

Explanation:

The correct answer is option 2- Old Partner's Capital Account.

Accumulated profits are in the form of general reserve, reserve fund etc. The new partner is not entitled to share in these reserves. Hence, at the time of admission, these reserves are transferred to the old partner's capital accounts in their old profit-sharing ratio.