Which of the following is not a purpose of a firm preparing a Revaluation Account?
Answer & explanation
Correct answer: option 4
Correct answer: Option (4) → To re-assess the profit-sharing ratio.
Concept: A Revaluation Account is opened on reconstitution to record the effect of revaluing assets and reassessing liabilities, as explained in Reconstitution of a Partnership Firm – Admission of a Partner.
Its genuine purposes are to re-evaluate over-stated or under-stated assets, to re-assess the value of liabilities and to bring unrecorded assets and liabilities into the books – so Options (1), (2) and (3) are valid purposes. The profit-sharing ratio is NOT determined through this account; the resulting gain or loss is merely transferred to the old partners in their old ratio. Hence “to re-assess the profit-sharing ratio” is not a purpose, making Option (4) correct.