Question : In the event of a change in the profit-sharing ratio, the General Reserve existing in the Balance Sheet is transferred to the Capital Accounts of partners in their
Option 1: sacrificing ratio
Option 2: gaining ratio
Option 3: old profit-sharing ratio
Option 4: new profit-sharing ratio
Correct Answer: old profit-sharing ratio
Solution : Answer = old profit-sharing ratio
If at the time of change in profit sharing ratio, reserve, accumulated profit and losses exist in the books of the firm, they are transferred to the partner's capital account on their old profit sharing ratio because reserve and accumulated profit and losses as on the date of change in profit sharing ratio were earned before the reconstitution of the firm.
Hence, the correct option is 3.
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