Question

When the General Reserve is distributed, is the partner's Capital Account debited or credited?

Answer 1

Sometimes a firm may have undistributed reserves and profits yet to be transferred to the partner's capital accounts, for example, general reserve. At the time of admission of a partner, these reserves are distributed to the partner's capital accounts in their old profit sharing ratio. The partner's capital account is credited with his share of the reserve.

The accounting entry is:

General Reserve a/c..... Dr.

To Partner's Capital a/c