Which of the following would affect the revaluation account at the time of reconstitution of a partnership firm?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Increase in assets
On reconstitution, assets and liabilities are revalued and every change in their values is passed through the Revaluation Account. An increase in the value of an asset is a gain, credited to it.
Why the other options are incorrect
Option (2) Drawings against capital — Incorrect. Drawings are recorded in the partner’s capital or current account; they do not change the value of any asset or liability.
Option (3) Interest on capital — Incorrect. It is an appropriation of profit, passed through the Profit and Loss Appropriation Account.
Option (4) Partner’s salary — Incorrect. It too is an appropriation of profit, not a change in the value of an asset or liability.
NCERT (2026-27 edition):
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