At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm are transferred to the capital account of:
- AOld partners in old profit sharing ratio
- BOld partners in new profit sharing ratio
- CAll the partner in the new profit sharing ratio
- DNew partner in old profit sharing ratio
Solution & Step-by-step Explanation
Undistributed profits and reserves accumulated prior to the admission of a new partner belong entirely to the founders who earned them. Therefore, these balances are transferred to the capital accounts of the old partners in their old profit-sharing ratio.