Q.State whether the following statement is true or false with reason.
Retiring partner is not entitled to share in general reserve and accumulated profit.

True. Reserves and accumulated profits built up while the retiring partner was in the firm belong to all partners and are distributed in the old profit-sharing ratio, giving the retiring partner a share.

A Reserve Fund, General Reserve or accumulated (undistributed) profit represents profits earned in earlier years that were kept back instead of being distributed. Since the retiring partner was a partner when these profits were earned, that share belongs to them and must be given at the time of retirement:

The statement is False. General reserve and accumulated profits are undistributed past profits earned by all partners together, including the one who is now retiring. On retirement, these balances are distributed among ALL partners (including the retiring partner) in their old profit-sharing ratio.

Why the statement is wrong

• A general reserve and accumulated profit (credit balance of Profit & Loss A/c) represent profits earned in earlier years that were kept in the business instead of being paid out.
• The retiring partner shared in earning those profits during the years he was in the firm, so denying him a share would be unfair. …