Which of the following statements are correct ?
(A) Retirement of a partner does not result into reconstitution of a firm.
(B) If the amount of any asset is understated, then the change, will be shown on the debit side of revaluation account.
(C) Profit or loss on the revaluation of assets and liabilities is distributed and transferred to capital account.
(D) Revaluation of asset is necessary because present value of assets may be different from book value.
Choose the Correct Combinations :
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (C) and (D) only
On retirement the old partnership deed ends and a new one begins, so the firm is reconstituted, and its assets and liabilities are revalued first.
(A) Retirement of a partner does not result into reconstitution of a firm. Incorrect. The existing deed comes to an end and the remaining partners carry on on changed terms, which is reconstitution.
(B) If the amount of any asset is understated, then the change, will be shown on the debit side of revaluation account. Incorrect. Raising an understated asset is a gain, so it is credited; the debit side takes decreases in assets and increases in liabilities.
(C) Profit or loss on the revaluation of assets and liabilities is distributed and transferred to capital account. Correct. The balance of the Revaluation Account is shared among the partners and closed to their capital accounts.
(D) Revaluation of asset is necessary because present value of assets may be different from book value. Correct. Assets are revalued so that they stand at their current values before the new arrangement begins.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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