A & B are partners sharing profits & losses in the ratio of 3 : 2. They admit C for 1/4^th share in the profits. On the date of admission, there exists a General Reserve of ₹4,60,000. They decided to retain it in the new Balance Sheet. The accounting treatment for it would be:

C's capital a/c will be debited by ₹1,15,000

The correct answer is Option (1) - C's capital a/c will be debited by ₹1,15,000.

Old ratio = 3:2
C admit with 1/4th share

As no other information is given so old ratio becomes the sacrificing ratio  i.e. 3:2.

General reserve = ₹460000
As firm wants to retain the general reserve so admitting partner share is debited with his share and sacrificing partners credited in the sacrificing ratio.

C share in general reserve = 460000 x 1/4
                                        = ₹115000

A's share = 115000 x 3/5
              = ₹69000

B's share = 115000 x 2/5
              = ₹46000

So journal entry will be for the adjustment of general reserve is as follows-
C's capital A/c  Dr.   ₹115000
    To A's capital A/c         ₹69000
    To B's capital A/c         ₹46000
(General Reserve adjusted in the gaining ratio)