Question

When the reserve fund is distributed to old partners, the _________ account is debited.

a) capital
b) revaluation a/c
c) reserve fund
d) profit and loss a/c

Answer 1

Answer:

Capital

Explanation:

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Answer 2

When the reserve fund is distributed to old partners, the c) reserve fund account is debited.

Reserve fund:

• A reserve fund is just a liquid reservoir that allows you to meet the costs of any future, unforeseen expenses, or financial commitments.
• A reserve fund is often stored in the form of cash in a Savings Account. 

Reserve fund account is debited:

• When general reserve is divided among partners, the general reserve account is debited as well as the capital accounts of all partners are credited.
• In the event that a partner retires, the reserves or cumulative profits and losses shown on the balance sheet must be transferred to the old partner's capital accounts.
• Because all reserves shown on the balance sheet on the day of retirement have been earned by all partners.

As a result, we transfer them to the capital accounts of all partners in the previous profit sharing ratio.