Accountancy Part AAdmission of a Partner

At the time of reconstitution of a partnership firm, investment worth…

At the time of reconstitution of a partnership firm, investment worth Rs. 1,500 (not mentioned in the balance sheet) is to be taken into account. The journal entry for this would be:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Investment A/c Dr. Rs. 1,500, to Revaluation A/c Rs. 1,500

An asset that the firm owns but has not recorded is brought into the books on reconstitution. Bringing it in increases the assets, which is a gain for the old partners, so the asset account is debited and Revaluation A/c is credited. The gain then reaches the old partners through the balance of Revaluation A/c, in their old ratio.

Investment A/c Dr. 1,500
To Revaluation A/c 1,500

Crediting the partners’ capital accounts straight away, as Option (1) does, skips the Revaluation Account, where every gain and loss of reconstitution is first collected and netted.

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

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Investment A/c Dr.		1,500
	To Partners' capital A/c			1,500

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Investment A/c Dr.		1,500
	To Revaluation A/c			1,500

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Revaluation A/c Dr.		1,500
	To Investment A/c			1,500

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Partners' Capital A/c Dr.		1,500
	To Investment A/c			1,500

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Investment A/c Dr.		1,500
	To Partners' capital A/c			1,500