At the time of admission of a new partner, in which ratio is the debit balance of the Profit and Loss Account distributed among the old partners?

Correct answer: Old profit-sharing ratio

The debit balance of the Profit and Loss Account represents an accumulated loss arising before the new partner’s admission. Hence, it is debited only to the old partners’ capital or current accounts in their old profit-sharing ratio. The new partner is not made responsible for this past loss. Exam tip: losses existing before admission are borne in the old ratio.