In the case of death of partner, the amount of general reserve is transferred to Partner's Capital accounts in which ratio?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Old ratio.
In the case of death of partner, the amount of general reserve is transferred to Partner's Capital accounts in old ratio.
Sometimes, the Balance Sheet of a firm may show accumulated profits in the form of general reserve and/on accumulated losses in the form of profit and loss account debit balance. The retiring/deceased partner is entitled to his/her share in the accumulated profits and is also liable to share the accumulated losses, if any. These accumulated profits or losses belong to all the partners and should be transferred to the capital accounts of all partners in their old profit sharing ratio.