Question

State the ratio in which the old partners share accumulated profits, reserves and losses.

Answer 1

Sometimes the firm may have accumulated profits and reserves in the form of General Reserve, Reserve Fund and/or Profit and Loss account. These have not yet been transferred to the partner's capitals accounts. The new partner is not entitled to share in these accumulated profits. These profits are transferred to the partner's capitals accounts in their old profit sharing ratios.

Similarly if there is an accumulated loss, it is transferred to the debit side of the partner's capitals accounts in their old profit sharing ratio.