The Profit or Loss on revaluation of accounts is transferred to:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Old partners in their old profit sharing ratio
When a firm is reconstituted, assets and liabilities are revalued through a Revaluation Account. The rise or fall in their values took place while the old partners ran the firm, so the profit or loss belongs to them. It is therefore transferred to the old partners' capital accounts in their old profit sharing ratio.
Why the other options are incorrect
Option (1) New partners in their new profit sharing ratio — Incorrect. A new partner gets no share of a gain or loss that arose before he joined, and the new ratio applies only to profits earned after the change.
Option (3) Old partners in their sacrificing ratio — Incorrect. The sacrificing ratio is used to share the new partner's premium for goodwill, which compensates for the share given up. Revaluation profit is a past gain and goes in the old ratio.
Option (4) Old partners in their gaining ratio — Incorrect. The gaining ratio is used on retirement or death to find who pays the outgoing partner for goodwill. It has no role in sharing revaluation profit.
NCERT (2026-27 edition): |