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Question

Accumulated profits are transferred to capital account in ______ratio.

A
old profit sharing ratio
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B
new profit sharing ratio
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C
sacrifice ratio
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D
gain ratio
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Solution

The correct option is A old profit sharing ratio
When a new partner is being admited into the firm, then before his admission all the existing reserves or accumulated profits in the books of the firm should be transferred to Old Partners in capital/current accounts in the old profit sharing ratio, because these items belong to the old partners and not to the new partner.

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