Question

.1. On admission of a partner, which of the following items of the Balance Sheet is transferred to the credit of Capital Accounts of old partners in the old Profit-sharing Ratio, if Capital Accounts are maintained on Fluctuating Capital Accounts Method: *

Deferred Revenue Expenditure
Profit and Loss Account (Debit Balance)
Profit and Loss Account (Credit Balance)
Balance in Drawings Account of partners

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Answer 1

Explanation:

At the time of admission of a new partner, we need to revalue the existing assets and liabilities and thus, prepare the revaluation account. The value of assets may be different from its book value because, with time, the value of some assets increases while that of some decreases. Also, the value of liabilities may be different from their book values. Also, there must be some assets or liabilities that are not recorded in the books need to be recorded.

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