If there is nothing mentioned at the time of admission of a new partner in the partnership firm, the accumulated reserves are ....................
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Distributed among old partners in old profit sharing ratio.
If there is nothing mentioned at the time of admission of a new partner in the partnership firm, the accumulated reserves are distributed among old partners in old profit sharing ratio.
Accumulated earnings are the sum of a company’s profits, retained earnings, earned surplus, or retained capital, after dividend payments, since the company’s inception. Accumulated losses refer to the advertisement expenditure and also previous year losses (if any) which have not been distributed among partners. These accrued gains or losses perfectly fits the partners and should be transferred to the capital a/c of the partners in their old profit sharing ratio, if there is nothing mentioned in the question.
Thus, When a new partner is admitted to the partnership, accumulated profits or reserves appearing in the old balance sheet is transferred to the old partner's capital accounts.