If at the time of admission, some positive balance of Profit and Loss A/C appears in the books, it will be transferred to:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Old Partner's Capital Account
A credit balance of Profit and Loss Account is an accumulated profit earned before the admission. The new partner has no right to it, so it is transferred to the old partners’ capital accounts in their old profit sharing ratio.
Why the other options are incorrect
Option (1) Profit and Loss account — Incorrect. The balance already sits in that account; it has to be closed, not kept there.
Option (2) Revaluation Account — Incorrect. The Revaluation Account records only changes in the values of assets and liabilities.
Option (4) All Partners Capital Account — Incorrect. This would give the new partner a share of profits earned before he joined.
NCERT (2026-27 edition): |