Assertion: When a partner retires, all the unrecorded assets and liabilities, the increase or decrease in the value of assets and liabilities are done with the help of a revaluation account.
Reasoning: A Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets or reassessment of liabilities and bringing unrecorded items into firm.
Answer & explanation
Correct answer: option 1
Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.
At the time of retirement, all the unrecorded assets and liabilities, the increase or decrease in the value of assets and liabilities are treated with the help of a revaluation account and the profit and loss on this account is shared by all the partners including the deceased partner.