Question

On retirement of a partner, the existing balance of general reserve and accumulated profit is transferred to all the partners capital a/c in the ____________.

• A. Gaining ratio
• B. Sacrificing ratio
• C. Old profit sharing ratio
• D. New profit sharing ratio

Answer 1

The correct option is C Old profit sharing ratio

At the time of retirement of a partner, if there exist any reserve or accumulated profit in the books of the firm, they should be transferred to the old partner's capital/current accounts in the old profit sharing ratio, because these items belongs to the old partners.

In the same manner, old partner's capital/current accounts should be debited in the old ratio if any accumulated loss appears in the asset side of the balance sheet.