CUET Preparation Today
Why is a Revaluation Account prepared at the time of retirement or death of a partner? |
To calculate the new profit-sharing ratio among remaining partners To determine the amount of goodwill to be paid To bring unrecorded assets and liabilities into the books To distribute accumulated profits among the remaining partners only |
To bring unrecorded assets and liabilities into the books |
The correct answer is option 3- To bring unrecorded assets and liabilities into the books. At the time of retirement or death of a partner there may be some assets which may not have been shown at their current values. Similarly, there may be certain liabilities which have been shown at a value different from the obligation to be met by the firm. Not only that, there may be some unrecorded assets and liabilities which need to be brought into books. A Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets and/or liabilities and bringing unrecorded items into firm’s books and the same is transferred to the capital account of all partners including retiring/deceased partners in their old profit sharing ratio. |
