What treatment is made of accumulated profits on the retirement of a partner?
Answer & explanation
Correct answer: option 1
(i) For transfer of accumulated profits (reserves):
Reserves A/c Dr.
To All Partners’ Capital A/c’s (Individually)
(Reserves transferred to all partners’ capital account’s in old profit sharing ratio).
(ii) For transfer of accumulated losses
All Partners’ Capital A/c’s (Individually) Dr.
To Profit and Loss A/c
(Accumulated loss transferred to all partners’ capital accounts in their old profit-sharing ratio)