Transfer of Accumulated Reserve:

Any amount kept aside as Reserve, General reserve, Reserve fund, contingency reserve etc., at the time of retirement of a partner, should be transferred to the capital accounts of all partners including retiring partner in the old profit sharing ratio.

Illustration :

Thangamuthu, Anaimuthu and Vairamuthu are partners sharing profit and loss in the ratio of 3:3:2. Thangamuthu wanted to retire on
1st June 2005, the firms books showed a general reserve of Rs.40,000. Pass entry.

Solution :

Journal Entry

Date	Particulars	L.F.	Debit Rs.	Credit Rs.
	General Reserve A/c                                                                                                                                        Dr.		40,000
	To Thangamuthu’s capital A/c			15,000
	To Anaimuthu’s Capital A/c			15,000
	To Vairamuthu’s capital A/c			10,000
	(General reserve transferred partners capital accounts)