At the time of admission of a new partner, in what ratio will the general reserve be distributed among the old partners if the new ratio is 3:2:1 and the old ratio is 4:1?

Correct answer: 4:1

General reserve represents profits accumulated before the admission of the new partner. Therefore, it is distributed only among the old partners in their old profit-sharing ratio, 4:1. The new ratio of 3:2:1 applies to profits earned after admission, not to the existing reserve. Exam tip: Distribute accumulated old profits, such as general reserve and credit balance of the Profit and Loss Account, in the old ratio.