At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:

Old partners in old profit sharing ratio

The correct answer is option 1- Old partners in old profit sharing ratio

At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of old partners in old profit sharing ratio.

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 the credit side of their capital current accounts in old profit-sharing ratio. Similarly, if there are some accumulated losses in the form of a debit balance of profit and loss account and/or deferred revenue expenditure appearing in the balance sheet of the firm. It should be transferred to the debit side of old partners’ capital accounts. The journal entry for the transfer of accumulated profits:
Profit and loss A/c 
    To old partners’ capital/current A/cs