Q.On retirement of a partner, General Reserve is transferred to the :

On retirement, General Reserve (an accumulated profit) is transferred to the capital accounts of all partners in their old profit-sharing ratio.

General Reserve represents past, undistributed profits that were earned while all partners — including the retiring one — were in the firm. Therefore, at the time of retirement it must be shared by everyone who helped earn it:

• It is credited to the capital accounts of all the partners in the old ratio.
• The retiring partner gets his due share, which then forms part of the amount payable to him. …