The following is the extract from the balance sheet of the firm with A, B and C as partners as on 31st march 2025.
Creditors Rs. 10,000
Machinery Rs. 20,000
Stock Rs. 12,000
Building Rs. 55,000
C retired from the firm and the following are the adjustments related to revaluation :
i. Stock to be valued at 92% of its book value.
ii. Value of building is to be appreciated by 20%.
iii. Creditors of Rs 2,000 are no longer payable.
Choose which of the following statements is true:
A. Stock A/c of Rs 960 is to be shown on the debit side of the revaluation account.
B. Stock A/c of Rs 960 is to be shown on the credit side of the revaluation account.
C. Creditors A/c of Rs 2,000 is to be shown on the credit side of the revaluation account.
D. Creditors A/c of Rs 2,000 is to be shown on the debit side of the revaluation account.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
Correct answer: Option (2) → A and C only
Concept: In the Revaluation Account a fall in an asset or a rise in a liability is a loss (debit), while a rise in an asset or a fall in a liability is a gain (credit) – per Reconstitution of a Partnership Firm – Retirement/Death of a Partner.
Stock falls from 12,000 to 92% = 11,040, a decrease of Rs 960 (a loss) shown on the DEBIT side – statement A is true.
Creditors of Rs 2,000 no longer payable is a gain shown on the CREDIT side – statement C is true.
Statements B and D state the reverse sides and are therefore wrong, so only A and C are correct.