When a new partner is admitted, the undistributed profits that appear in the balance sheet of the old firm are transferred to the capital account of: Option 1: Old partners in new profit sharing ratio Option 2: Old partners in old profit sharing ratio Option 3: All the partners in the new profit sharing ratio Option 4: All the partners in the old profit sharing ratio

Answer: Old partners in old profit sharing ratio. Solution: When a new partner is admitted, the undistributed profits (reserves, accumulated profits) shown in the balance sheet represent profits earned by the old partners before the new partner's entry. The new partner has no claim over these past profits. These undistributed profits must be transferred to the old partners' capital accounts in their old profit sharing ratio because: - The profits were earned during the period when only old partners were running the business - Old partners shared profits in their old ratio during that period - These accumulated profits rightfully belong to them in the same ratio Journal Entry: Undistributed Profits A/c ... Dr. To Old Partners' Capital A/cs (in old ratio) Example: If partners A and B share profits in the ratio 3:2 and there is a reserve of ₹50,000, then: - A's Capital A/c will be credited with ₹30,000 - B's Capital A/c will be credited with ₹20,000 The new partner joins only after these past profits are distributed to old partners. From the date of admission onwards, profits will be shared in the new ratio among all partners. The new profit sharing ratio applies only to future profits earned after the new partner's admission, not to profits accumulated in the past.

Partnership

Admission

Easy

common

When a new partner is admitted, the undistributed profits that appear in the balance sheet of the old firm are transferred to the capital account of:

Old partners in new profit sharing ratio

Old partners in old profit sharing ratio

All the partners in the new profit sharing ratio

All the partners in the old profit sharing ratio

✅ Correct Option: 2

When a new partner is admitted, the undistributed profits (reserves, accumulated profits) shown in the balance sheet represent profits earned by the old partners before the new partner's entry. The new partner has no claim over these past profits.

These undistributed profits must be transferred to the old partners' capital accounts in their old profit sharing ratio because:

The profits were earned during the period when only old partners were running the business
Old partners shared profits in their old ratio during that period
These accumulated profits rightfully belong to them in the same ratio

Journal Entry:

Undistributed Profits A/c ... Dr.

To Old Partners' Capital A/cs (in old ratio)

Example: If partners A and B share profits in the ratio 3:2 and there is a reserve of ₹50,000, then:

A's Capital A/c will be credited with ₹30,000
B's Capital A/c will be credited with ₹20,000

The new partner joins only after these past profits are distributed to old partners. From the date of admission onwards, profits will be shared in the new ratio among all partners.

The new profit sharing ratio applies only to future profits earned after the new partner's admission, not to profits accumulated in the past.

2026: 13 May Shift 2

At the time of admission of new partner Vansh, old partners Shikha and Sheetal had debtors of Rs. 6,20,000 in their books. As per terms of admission, assets were revalued, and it was found that debtors worth Rs. 15,000 had turned bad and hence should be written off. Which journal entry reflects the correct accounting treatment of the above situation?

2022: 8 Aug Shift 2

At the time a new partner is admitted, revaluation of assets and liabilities is made for the:

2025: 22 May Shift 2

While doing adjustment of partners capital, for the amount of capital to be brought in by the partner, the following entry will be passed:

2025: 27 May Shift 1

When a new partner brings his share of goodwill in cash, the amount is credited to-

2025: 31 May Shift 1

Anshu and Nitu are partners sharing profits in the ratio of 3:2. They admitted Jyoti as a new partner for 3/10 share which she acquired 2/10 from Anshu and 1/10 from Nitu. The new profit sharing ratio of Anshu, Nitu and Jyoti.

2026: 21 May Shift 2

Sometimes, at the time of admission, the old partners agree that their capital should also be adjusted to be proportionate to their profit sharing ratio on the basis of the new partner's capital. Identify the correct sequence to be followed:

A. Ascertain the total capital of the firm on the basis of the new partner's capital.

B. Compare old partners' capital with adjusted capital of old partners.

C. Ascertain capital of old partners after all adjustments like interest on capital, salary, etc.

D. Ascertain deficiency or surplus capital of partners.

Choose the correct answer from the options given below:

When a new partner is admitted, the undistributed profits that appear in the balance sheet of the old firm are transferred to the capital account of:

Solution

Related questions:

Keyboard Shortcuts

CUET Accountancy Past Year Questions (Topic-Wise)