Why are the old partners’ capital accounts debited when accumulated loss is written off during the reconstitution of a partnership?

Correct answer: Because the loss reduces their capital

Accumulated loss is an unadjusted loss of earlier years. At the time of reconstitution, it is charged to the old partners’ capital accounts in their old profit-sharing ratio, thereby reducing their capital balances; hence, those accounts are debited. Option B is incorrect because a loss decreases, rather than increases, capital. Exam tip: accumulated loss leads to a debit to old partners’ capital accounts, while accumulated profits or reserves lead to a credit.