At the time of admission of a new partner, general reserve appears in the old balance sheet is transferred to:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Old partner's capital account
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General Reserve represents accumulated profits of the firm that belong to the old partners (since it was created before the new partner’s admission).
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At the time of admission of a new partner, the new partner should not get a share in past profits.
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Hence, the balance of General Reserve is distributed among the old partners in their old profit-sharing ratio.