Reserves and accumulated profits are transferred to partners lsquo capital accounts at the time of r...........

Accountancy (CUET) Fundamentals of Partnership

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Reserves and accumulated profits are transferred to partners ‘ capital accounts at the time of reconstitution in:

Old profit-sharing ratio

Sacrificing Ratio

Gaining ratio

New profit-sharing ratio

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Explanation:

- When a partnership firm is reconstituted, reserves and accumulated profits are redistributed among partners.

- These amounts are transferred to the partners' capital accounts based on the Old Profit-Sharing Ratio.

- This is because the reserves and accumulated profits were earned before the reconstitution, and so they belong to the partners according to their old agreement.

- The Sacrificing Ratio, Gaining Ratio, and New Profit-Sharing Ratio are used for different adjustments, not for distributing existing reserves and profits.

Correct Answer: Old profit-sharing ratio