This question deals with the treatment of accumulated losses (debit balance in Profit and Loss Account) at the time of admission of a new partner. As per the textbook context (Illustration 22), a debit balance in the Profit and Loss Account represents accumulated losses of the firm. When a new partner is admitted, these accumulated losses must be transferred to the old partners' capital accounts in their old profit-sharing ratio. Since Amit and Viney share profits and losses in 3:1 ratio, the debit balance of Rs. 40,000 is divided between them accordingly: Amit's share = 3/$4 \times 40$,000 = Rs. 30,000 and Viney's share = 1/$4 \times 40$,000 = Rs. 10,000. The old partners' capital accounts are debited (reducing their capital) and the Profit and Loss Account is credited (closing the account).