At the time of admission of a partner, how is the credit balance of the Profit and Loss Account treated?

Correct answer: Accumulated profit

A credit balance in the Profit and Loss Account represents accumulated profit earned by the business. On the admission of a partner, it is credited to the capital accounts of the old partners in their old profit-sharing ratio. Therefore, option A is correct. A debit balance would represent accumulated loss, not a credit balance. Exam tip: Credit balance means profit, while debit balance means loss.