Accountancy Part AAdmission of a Partner

P and T are partners sharing profits and losses in the ratio of 3: 2.…

P and T are partners sharing profits and losses in the ratio of 3: 2. They admitted R for 1/5th share. General Reserve appeared in the books at ₹45,000. New profit sharing ratio among partners is 5: 3: 2. General Reserve will be treated as follows:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → General Reserve will be distributed in the Ratio of 3:2 among old partners.

The general reserve was built up out of profits earned before R joined, so it belongs only to the old partners and is shared in their old ratio 3:2: P gets Rs. 27,000 and T Rs. 18,000.

The new ratio 5:3:2 (or its old-partner part 5:3) applies only to profits after admission; keeping the reserve in the new books would give R a share in profits earned before he joined.

NCERT (2026-27 edition):
Adjustment for Accumulated Profits and Losses – “Sometimes a firm may have accumulated profits not yet transferred to capital accounts of the partners. These are usually in the form of general reserve, reserve and/or Profit and Loss Account. The new partner is not entitled to have any share in such accumulated profits. These are distributed among the partners by transferring it to their capital current accounts in old profit sharing ratio.”