What is the effect on old partners capital accounts when accumulated loss is distributed?

Correct answer: Capital accounts are debited

The direct answer is option B: the old partners’ capital accounts are debited. An accumulated loss is a loss from an earlier period, before the new partner joined. Since the old partners were responsible for that earlier period, the loss must be borne by them in their old profit-sharing ratio. A debit to a partner’s capital account reduces that capital. Step by step: identify the accumulated loss; distribute it among old partners in the old ratio; debit each old partner’s capital or current account; credit the account representing the loss, usually Profit and Loss Account debit balance or a related adjustment account. Option A is wrong because a credit would increase capital, whereas a loss must reduce capital. Option B is correct because accumulated loss decreases the old partners’ claims in the firm. Option C is wrong because a reserve is an accumulated profit, not the account to be credited for distributing a loss. Option D is wrong because no new cash transaction occurs; the adjustment is made in partners’ accounts. The new partner is not charged with a loss belonging to the pre-admission period. Memory cue: old loss means old partners’ capital debit.