(i) When partners decide to distribute the balances of reserves and accumulated profits and losses at the time of admission of a new partner : These balances must be distributed among old partners in their old profit-loss ratio even if no instruction is given in ‘ the question regarding reserves and accumulated profit and loss consequently, these balances will not be shown in the balance sheet of the new firm.
(ii) If partners decide not to make any change in the balance of reserves, accumulated profit and loss and fictitious assets and show the balances in the new balance sheet at their old values, in this situation if the net amount of such balances is credit, it is debited to the capital accounts of gaining partner including new partner by the amount of gain and credited to sacrificing partners capital accounts by the amount of sacrifice. If net amount of such balances is debit, it is credited to the gaining partner’s capital accounts by the amount of gain and debited to sacrificing partners capital accounts by the amount of their sacrifice.
