There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A): Undistributed profits or losses appearing in the balance sheet at the time of admission should be transferred to the old partner’s capital/current account.
Reason (R): Undistributed profits or losses appearing in the balance sheet at the time of admission belong to the old partners as they are earned by them.

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

The correct answer is option 1- Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Assertion (A): Undistributed profits or losses appearing in the balance sheet at the time of admission should be transferred to the old partner’s capital/current account.THIS IS TRUE. When a new partner is admitted, undistributed profits or losses from the previous accounting periods are typically adjusted through the capital/current accounts of the existing partners.

Reason (R): Undistributed profits or losses appearing in the balance sheet at the time of admission belong to the old partners as they are earned by them. THIS IS TRUE. It states that the undistributed profits or losses belong to the old partners because these profits or losses were generated during the period when the old partners were active in the partnership.

This reasoning aligns with the principle that partners are entitled to their share of profits or losses generated during their tenure in the partnership. So, the correct answer is both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).