Question

Q8. Why is it necessary to revalue assets and reassess liabilities of a firm in case of admission of a new partner?

Answer 1

When a new partner joins the firm, it is very important to revalue the assets and liabilities of the firm to asertain its true and fair values. It is to be done because the value of assets and liability may have increased or decreased and consequently their corresponding figures in old balance sheet may either be understated or overstated. It may also be possible that some of assets and liabilites are left unrecorded.

Thus in order to record the increase and decrease in the market value of assets and liabilities,revaluation account is created and any profit or losses associated with this increase or decrease are distributed among the old partners of the fir