The balance of Revaluation Account is transferred to old Partner's Capital Accounts in which ratio?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Old profit-sharing ratio.
The balance of the Revaluation Account is transferred to the old partners' Capital Accounts in the old profit-sharing ratio.
When a partnership firm revalues its assets and liabilities, any resulting gain or loss is recorded in the Revaluation Account. Upon the retirement or admission of a partner, this revaluation balance needs to be adjusted among the old partners. The adjustment is made based on their old profit-sharing ratio because the gain or loss from the revaluation affects their existing capital accounts based on their previous agreement.