Which ratio is the basis for distributing reserves?

Correct answer: Old profit-sharing ratio

Reserves are accumulated from profits earned before the admission of a new partner. Since those earlier profits belong to the existing partners, the reserve must be distributed among them in the ratio in which they were entitled to share those profits at that time. That ratio is the old profit-sharing ratio, so option A is correct. The new profit-sharing ratio applies to profits earned after reconstitution and therefore cannot normally be used for an old reserve. The sacrificing ratio measures the share surrendered by old partners to the incoming partner and is mainly used in goodwill adjustments, not in distributing past reserves. Capital ratio is also irrelevant unless a specific agreement provides otherwise. Thus, the governing principle is ownership of past profits.