The account which shows change in the value of assets and liabilities is knows as:

Revaluation Account

The correct answer is option 1- Revaluation Account.

The account which shows change in the value of assets and liabilities is knows as Revaluation Account.

The Revaluation Account is prepared in partnership accounting to record changes in the value of assets and liabilities, especially At the time of admission, retirement, or death of a partner to reflect the increase or decrease in asset values or liability obligations. 

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.