Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

Profits made on Revaluation of Assets and Reassessment of Liabilities…

Profits made on Revaluation of Assets and Reassessment of Liabilities is distributed among whom?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Old Partners

Assets and liabilities are revalued because the change in their values took place while the old partners ran the firm. So the profit on revaluation belongs to the old partners and is shared by them in their old ratio.

Why the other options are incorrect

Option (1) All Partners — Incorrect. An incoming partner has no claim to gains made before he joined.
Option (2) Admitted Partner only — Incorrect. The new partner gets no part of the revaluation profit.
Option (3) Retiring Partner only — Incorrect. On a retirement the profit goes to all the old partners, the retiring partner included.

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… For this purpose the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit sharing ratio.”