At the time of a partner’s admission, why is Employees’ Provident Fund not distributed among the old partners like a reserve?

Correct answer: Because it is an outside liability payable to employees

Employees’ Provident Fund represents amounts collected or contributed for employees that the firm must pay to the employees or the relevant fund authority. Therefore, it is an outside liability, not accumulated profit or a reserve distributable among partners. In contrast, a general reserve is distributed among the old partners in their profit-sharing ratio. Exam tip: An amount payable to employees, the government, or another external party is treated as a liability, not as a reserve.