Accountancy Part AAdmission of a Partner

If, at the time of admission of a partner, any reserve and accumulate…

If, at the time of admission of a partner, any reserve and accumulated profits or losses exist in books of the firm, these should be transferred to ____________.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Old Partner’s Capital/ Current A/c

Reserves and accumulated profits were earned before the new partner joined, so they belong to the old partners. They are transferred to the old partners' capital or current accounts in the old profit sharing ratio; an accumulated loss is debited to them in the same way.

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.”