Question

On what basis revaluation of assets and liabilities are done at the time of admission of partners?
please give me accurate answer.​

Answer 1

Answer:

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Explanation:

Meaning

The value of assets shown in Balance Sheet may be different than market value. So the increase

or decrease in the value at the time of admission of new partner belongs to old partners. The new

partner has no right over such past profits Also he should not suffer due to losses on revaluation of

assets.

Same way there may be unrecorded Asset or unrecorded Liability at the time of admission. It

should be shown in the books before admitting the new partner. Such adjustment of values of assets

and liabilities is called as ‘Revaluation of Assets and Liabilities’.

At the time of reconstitution of the firm, assets and liabilities of the firm are revalued. The

change made in the value of assets and liabilities are recorded in ‘Revaluation Account’ or ‘Profit

and Loss Adjustment Account’. After recording the increase or decrease in asset and liabilities the

gain or loss on revaluation is transferred to old partners’ Capital / Current accounts in their old profit

sharing ratio. Revaluation Account / Profit and Loss Adjustment account is a Nominal Account.