Any gain or loss arising from Adjustments for Revaluation of Assets and Reassessment of Liabilities shall be distributed among:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → The old partners in their old profit sharing ratio
The gain or loss on revaluation arose while only the old partners were running the firm, and in the ratio they were then sharing. So the balance of the Revaluation Account goes to the old partners in their old profit sharing ratio. The new partner has no share in it, because the change in value took place before he joined.
Why the other options are incorrect
Option (2) The old partners in their sacrificing sharing ratio — Incorrect. The sacrificing ratio is used to share the premium for goodwill brought in by the new partner, which compensates those who give up a part of their share. A revaluation gain is not compensation for a sacrifice.
Option (3) All partners in their new profit sharing ratio — Incorrect. The new partner would then share a gain or loss earned before he joined, which is the very thing revaluation is meant to prevent.
Option (4) The old partners in their new profit sharing ratio — Incorrect. The new ratio applies only to profits from the date of admission; the revaluation result belongs to the earlier period.
NCERT (2026-27 edition): |