Consider the following facts related to Revaluation Account, its adju…

Consider the following facts related to Revaluation Account, its adjustments and treatment of reserves.

A. Revaluation profit is distributed in the capital ratio of the partners.

B. Revaluation Account is considered as Nominal Account.

C. When all debtors are good, existing provision for doubtful debt is not distributed and continued in future.

D. Under-valuation of Inventories is adjusted on the credit side of Revaluation A/c

E. Excess amount of workmen compensation claim over workmen compensation reserve is transferred to debit side of Revaluation A/c.

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → B, D and E only

A. Revaluation profit is distributed in the capital ratio of the partners. — False. The balance of the Revaluation Account goes to the old partners in their old profit sharing ratio.

B. Revaluation Account is considered as Nominal Account. — True. It records only gains and losses on revaluation, and its balance is closed to the partners.

C. When all debtors are good, existing provision for doubtful debt is not distributed and continued in future. — False. If no debt is doubtful, the provision is no longer needed; it is written back to the credit of the Revaluation Account.

D. Under-valuation of Inventories is adjusted on the credit side of Revaluation A/c — True. Raising an undervalued asset to its proper value is a gain, credited to the Revaluation Account.

E. Excess amount of workmen compensation claim over workmen compensation reserve is transferred to debit side of Revaluation A/c. — True. The reserve meets the claim first; the excess is a new liability, a loss debited to the Revaluation Account.

Note: Statements B, C and E are not covered in any edition of the NCERT Accountancy 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.”