Question

Why are assets and liability revaluated on admission of new partner? Give reason

Answer 1

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Revaluation of Assets and Liabilities. On admission of a new partner, the firm stands reconstituted and consequently, the assets are re-valued and liabilities are reassessed. ... It is debited with the decrease in the value of assets and the increase in the value of liabilities.

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Answer 2

✰ QUESTION.

• ❍ Why are assets and liability revaluated on admission of new partner? Give reason.

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✰ EXPLANATION.

☯ REQUIRED ANSWER.

• ➣ This is 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.

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✰ EXPLORE MORE.

❍ Why is it necessary to revalue the assets and liabilities?

• ➣ why is it necessary to revalue the assets and liabilities on the reconstitution of the firm? ... This is done because the value of assets and liabilities may have increased or decreased and consequently their corresponding figures in the old balance sheet may either be understated or overstated.

❍ Why revaluation account is prepared on admission of a partner?

• ➣ Revaluation account is necessary to be prepared as it records any change in the assets and liabilities of a company, which is required for the new partner to know. It is because a new partner will not be ready to suffer the loss during the period before his admission.

❍ What entries are passed for revaluation of assets and liabilities on admission of a new partner?

• ➣ Revaluation account is also called Profit and loss adjustment account. It is a nominal account. Revaluation account is credited with increase in value of assets and decrease in the value of liabilities. It is debited with decrease in value of assets and increase in the value of liabilities.

❍ Why are assets revalued?

• ➣ The purpose of a revaluation is to bring into the books the fair market value of fixed assets. This may be helpful in order to decide whether to invest in another business. If a company wants to sell one of its assets, it is revalued in preparation for sales negotiations.

❍ What is revalued amount?

• ➣ Revaluation is an adjustment made to the recorded value of an asset to accurately reflect its current market value. ... When purchasing a fixed asset, it is usually recorded at cost-price.

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