Which account is debited while closing general reserve?

Correct answer: General Reserve Account

The correct answer is A: General Reserve Account is debited. General Reserve normally has a credit balance because it was created by retaining past profits. To close an account, the opposite side is used; therefore a credit-balance reserve is debited when it is distributed. The corresponding credit is given to the old partners’ Capital Accounts or Current Accounts in their old profit-sharing ratio. Option A is correct. Option B is not the account being closed; old partners’ accounts receive the credit. Option C is wrong because the reserve belongs to the period before admission and is not the new partner’s capital. Option D is wrong because no cash or bank movement is necessary merely to distribute an existing reserve. Memory cue: close a credit balance by debiting it; distribute the reserve by crediting old partners.