Question

At the time of admission of a new partner general reserve appearing in the old balance sheet is transferred to_______

• A. All Partner's Capital A/C
• B. New Partner's Capital A/C
• C. Old Partner's Capital A/C
• D. Gaining Partner's Capital A/C

Answer 1

The Correct Option is C

In the context of accountancy, when a new partner is admitted into a partnership, the general reserve, which appears on the old balance sheet, needs to be addressed. The general reserve is an accumulated reserve created from the profits over the years. Upon admission of a new partner, it is vital to distribute the existing general reserve among the old partners as per their old profit-sharing ratio before the new partner's entry.

Here is why the general reserve is transferred to the Old Partners' Capital Accounts:

1. The general reserve is built from profits that were generated while only the old partners were in the partnership.
2. It equitably recognizes the participation of the old partners in creating this reserve, which was accumulated without the contribution of the new partner.
3. This process ensures that the old partners receive their fair share of reserves before the new profit-sharing agreement comes into effect with the new partner.

Therefore, the correct answer is: Old Partner's Capital A/C.