After adjustment of accumulated profits what is the direct effect on new partner capital?

Correct answer: No direct effect

The direct answer is option A: there is no direct effect on the new partner’s capital from distributing accumulated profits. Accumulated profits, such as a general reserve or undistributed past profit, were earned before the new partner joined. They therefore belong to the old partners and are transferred to their capital or current accounts in the old ratio. Step by step: identify the accumulated profit; confirm that it arose before admission; calculate each old partner’s share in the old ratio; credit only the old partners. The new partner’s capital is not credited merely because a reserve exists. Option A is correct because the reserve adjustment is made among old partners. Option B is wrong because the new partner does not automatically receive old profits, so capital does not always increase. Option C is wrong because capital does not always decrease; there is no direct adjustment to it in this case. Option D is clearly wrong because nothing in reserve distribution makes the new partner’s capital zero. The new partner’s capital can be affected by separate matters, such as the capital introduced, goodwill arrangements, or agreed adjustments, but not directly by distribution of old accumulated profit. Memory cue: pre-admission reserve goes to old partners, not the incoming partner.