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Home Questions PFZB7E7KSD
Target Exam

CUET

Subject

-- Accountancy Part A

Chapter

Admission of a Partner

Question:

Match the following JOURNAL ENTRIES with respect to revaluation account.

LIST 1 LIST 2
A) Appreciation in the amount of a liability I) Liability A/c Dr.
           To Revaluation A/c
B) Reduction in the amount of a liability II) Asset A/c Dr.
          To Revaluation A/c
C) Unrecorded asset  III) Revaluation A/c Dr.
          To Liability A/c
D) Transferring loss on revaluation IV) Old partner’s Capital A/cs Dr. 
           To Revaluation A/c
Options:

A-I, B-II, C- III, D- IV

A-III, B-I, C- II, D- IV

A-I, B-III, C- II, D- IV

A-IV, B-II, C- III, D- I

Correct Answer:

A-III, B-I, C- II, D- IV

Explanation:

The correct answer is option 2- A-III, B-I, C- II, D- IV. 

LIST 1 LIST 2
A) Appreciation in the amount of a liability III) Revaluation A/c Dr.
          To Liability A/c
B) Reduction in the amount of a liability I) Liability A/c Dr.
           To Revaluation A/c
C) Unrecorded asset  II) Asset A/c Dr.
          To Revaluation A/c
D) Transferring loss on revaluation IV) Old partner’s Capital A/cs Dr. 
           To Revaluation A/c

 

Revaluation account serves as a record of changes in the value of assets and liabilities. When there is an increase in the value of each asset or a decrease in liabilities, it is considered a gain and is credited to the revaluation account. Conversely, when there is a decrease in the value of assets or an increase in liabilities, it is considered a loss and is debited to the revaluation account. Additionally, any unrecorded assets are credited to the revaluation account, and unrecorded liabilities are debited to the revaluation account to ensure proper accounting. After all the adjustments are made, the revaluation account's final balance can either be a credit or a debit. If it shows a credit balance, it indicates a net gain resulting from the revaluation process. On the other hand, if it shows a debit balance, it indicates a net loss from the revaluation. Ultimately, the net gain or net loss reflected in the revaluation account will be transferred to the capital accounts of the old partners based on the previously agreed-upon ratio among the partners. This ensures that the partners' capital accounts are adjusted to account for the changes in the partnership's assets and liabilities due to the revaluation.

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