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 debt side of Revaluation A/c.

Choose the correct answer from the options given below :

B, D and E only

The correct answer is option (3) : B, D and E only

A. Revaluation profit is distributed in the capital ratio of the partners- This statement is wrong. Revaluation profit is shared between partners in their old profit sharing ratio.

B. Revaluation Account is considered as Nominal Account- This statement is correct. Nominal account follows the rule of 'debiting all expenses and losses and credit all income and gains' which the revaluation account follows. At the time of admission of a new partner, it is always desirable to ascertain whether the assets of the firm are shown in books at their current values. In case the assets are overstated or understated, these are revalued. Similarly, a reassessment of the liabilities is also done so that these are brought in the books at their correct values. At times there may also be some unrecorded assets and liabilities of the firm. These also have to be brought into the books of the firm. 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. Similarly unrecorded assets are credited and unrecorded liabilities are debited to the revaluation account. If the revaluation account finally shows a credit balance then it indicates net gain and if there is a debit balance then it indicates net loss which will be transferred to the capital accounts of the old partners in old ratio.

C. When all debtors are good, existing provision for doubtful debt is not distributed and continued in future- This statement is wrong. When all debtors are good there is no need of any provision, It is discontinued.

D. Under - valuation of Inventories is adjusted on the credit side of Revaluation A/c- This statement is correct. Undervaluation means item is recorded at less price which should now corrected. Increase in inventory is a gain for the firm which is credited to the revaluation account.

E. Excess amount of workmen compensation claim over workmen compensation reserve is transferred to debt side of Revaluation A/c- This statement is correct. Excess of claim over reserve is a liability for the firm which is a loss for the firm and debit to revaluation account.