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Given below are two statements, one labelled as
Assertion (A) and the other labelled as Reason (R):
Assertion (A): Revaluation Account is prepared at the time of admission of a partner.
Reason (R): It is required to adjust the values of assets and liabilities at the time of admission of a partner, so that the true financial position of the firm is reflected.
In the context of the above two statements, which of the following is correct? "
Assertion (A): Revaluation Account is prepared at the time of admission of a partner.
Reason (R): It is required to adjust the values of assets and liabilities at the time of admission of a partner, so that the true financial position of the firm is reflected.
In the context of the above two statements, which of the following is correct? "
Answer & explanation
Correct answer: option 1
Both (A) and (R) are correct and (R) is the correct reason of (A).
Revaluation account is a nominal account prepared for the purpose of distributing and transferring the profit or loss arising out of an increase or decrease in the book value of assets and liabilities of the partnership firm at the time of change in profit sharing ratio, admission of a partner, the retirement of a partner. It is required to adjust the values of assets and liabilities at the time of admission of a partner, so that the true financial position of the firm is reflected.
Revaluation account is a nominal account prepared for the purpose of distributing and transferring the profit or loss arising out of an increase or decrease in the book value of assets and liabilities of the partnership firm at the time of change in profit sharing ratio, admission of a partner, the retirement of a partner. It is required to adjust the values of assets and liabilities at the time of admission of a partner, so that the true financial position of the firm is reflected.