Practicing Success
Practicing Success
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What is the purpose of the below journal entry? |
To transfer accumulated profits to the capital accounts of all partners To transfer accumulated losses to the capital accounts of all partners To transfer profit and loss account debit balance to the capital accounts of all partners To transfer reserves to the profit and loss account |
To transfer accumulated profits to the capital accounts of all partners |
The correct answer is option 1- To transfer accumulated profits to the capital accounts of all partners. If there are accumulated losses and profits on the retirement or death of a partner then it will be distributed between all partners in their old ratio. In case of loss partners account are debited whereas in case of profit partner's account are credited. Reserves are the accumulated profits. These reserves distribution will make the capital accounts of partners with an increase amount. |
