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Question
When the general reserve is distributed between all the partner's, then
When the general reserve is distributed between all the partner's, then
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Solution
The correct option is B general reserve
When general reserve is distributed between partner's, then the general reserve account is debited and all the partner's capital account is credited. In case of retirement of a partner, we need to transfer the reserves or accumulated profits and losses appearing in the balance sheet to the old partners capital accounts.
Since all reserves showing in the balance sheet on the date of retirement are earned by all partners. Therefore, we transfer them to all partners' capital accounts in the old profit sharing ratio.
When general reserve is distributed between partner's, then the general reserve account is debited and all the partner's capital account is credited.
In case of retirement of a partner, we need to transfer the reserves or accumulated profits and losses appearing in the balance sheet to the old partners capital accounts.
Since all reserves showing in the balance sheet on the date of retirement are earned by all partners. Therefore, we transfer them to all partners' capital accounts in the old profit sharing ratio.
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