Which of the following will affect the Revaluation Gain or Loss at th…

Which of the following will affect the Revaluation Gain or Loss at the time of reconstitution?

A. Undervaluation of Building

B. Overvaluation of Stock

C. Valuation of Goodwill

D. Reserve appearing in Books

E. Unrecorded Assets

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A, B and E only

The Revaluation Account takes only changes in the values of assets and liabilities and unrecorded items; goodwill and reserves are adjusted separately in the partners’ capital accounts.

A. Undervaluation of Building — True. Raising the building to its proper value is a gain credited to the Revaluation Account.

B. Overvaluation of Stock — True. Reducing the stock to its proper value is a loss debited to it.

C. Valuation of Goodwill — False. Goodwill is a separate adjustment between the partners’ capital accounts.

D. Reserve appearing in Books — False. Reserves are distributed to the old partners in their old ratio, not through the Revaluation Account.

E. Unrecorded Assets — True. An unrecorded asset brought into the books is credited to the Revaluation Account.

NCERT (2026-27 edition):
Admission of a New Partner

Extract from the NCERT textbook

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… 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. In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss. Similarly unrecorded assets are credited and unrecorded liabilities are debited to the revaluation account.”