At the time of retirement of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:
- ARetired partner only
- BRemaining partners in the new profit sharing ratio
- COld partners in old profit sharing ratio
- DOld partners in the sacrificing ratio
Solution & Step-by-step Explanation
Undistributed profits and accumulated reserves shown in the balance sheet belong to the era prior to reconstitution. Hence, they are earned by all the existing partners of the old firm structure. At the time of retirement, these balances are distributed among all old partners in their old profit sharing ratio.