If there are some accumulated losses in the form of a debit balance of profit and loss account appearing in the balance sheet of the firm, it should be transferred to:
- AThe old partners' capital accounts
- BThe new partners' capital accounts
- CAll partners' capital accounts
- DNot to any partners' capital accounts
Solution & Step-by-step Explanation
Accumulated losses (debit balance of the profit and loss account) appearing in the balance sheet at the time of reconstitution belong to the pre-existing partners. These losses must be written off by debiting the old partners' capital accounts in their old profit sharing ratio.