Accountancy Part AAdmission of a Partner

At the time of admission of a partner, reduction in the value of an a…

At the time of admission of a partner, reduction in the value of an asset will be debited to:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Revaluation A/c

On the admission of a partner, assets and liabilities are revalued through the Revaluation Account. A decrease in the value of an asset is a loss, so it is debited to the Revaluation Account (and credited to the asset).

Option (1) Cash A/c — Incorrect. No cash is paid or received when an asset is revalued.

Option (2) Partner’s Capital A/c — Incorrect. The loss reaches the partners’ capital accounts only through the balance of the Revaluation Account.

Option (3) Realisation A/c — Incorrect. The Realisation Account is opened only on dissolution of the firm.

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… 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. 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.”