Match List – I with List – II.

Choose the correct answer from the options given below :

A-IV, B-III, C-I, D-II

The correct answer is Option (1) - A-IV, B-III, C-I, D-II.

* Increase in value of Asset- Credit side of revaluation account.

* Decrease in value of Asset- Debit side of revaluation account.

* Profit on revaluation- Credit side of capital account.

* Asset taken over by partner- Partner capital account debit side.

At the time of admission of a new partner, it is always desirable to ascertain whether the assets of the firm are shown in books at their current values. In case the assets are overstated or understated, these are revalued. Similarly, a reassessment of the liabilities is also done so that these are brought in the books at their correct values. At times there may also be some unrecorded assets and liabilities of the firm. These also have to be brought into the books of the firm. 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. In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss. Similarly unrecorded assets are credited and unrecorded liabilities are debited to the revaluation account. If the revaluation account finally shows a credit balance then it indicates net gain and if there is a debit balance then it indicates net loss which will be transferred to the capital accounts of the old partners in old ratio.