Assertion: It is necessary to show the true position of the firm at the time of admission of a new partner.
Reasoning: The gain or loss on revaluation which is transferred to all the partner’s capital account in the new profit sharing ratio.
Reasoning: The gain or loss on revaluation which is transferred to all the partner’s capital account in the new profit sharing ratio.
Answer & explanation
Correct answer: option 3
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.