Which of the given transactions are to be transferred to Revaluation…

Which of the given transactions are to be transferred to Revaluation Account

A. Stock was overvalued by 20%
B. General reserve appearing in Books ₹2,00,000
C. Goodwill valued at ₹1,50,000
D. Workers claim of ₹ 20,000, when there was no workmen Compensation fund
E. Goodwill appearing in the books ₹1,00,000

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → A and D only

The Revaluation Account takes only the changes in the values of assets and liabilities and any unrecorded asset or liability. Reserves and goodwill are adjusted through the partners’ capital accounts.

A. Stock was overvalued by 20% — Correct. Reducing the stock to its real value is a decrease in an asset, a loss debited to the Revaluation Account.

B. General reserve appearing in Books ₹2,00,000 — Incorrect. Accumulated profit goes to the old partners’ capital accounts in the old ratio.

C. Goodwill valued at ₹1,50,000 — Incorrect. The value of goodwill is adjusted through the capital accounts of the partners.

D. Workers claim of ₹ 20,000, when there was no workmen Compensation fund — Correct. With no fund to meet it, the claim is a new liability, a loss debited to the Revaluation Account.

E. Goodwill appearing in the books ₹1,00,000 — Incorrect. Existing goodwill is written off to the old partners’ capital accounts in the old ratio.

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… 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.”

NCERT (2026-27 edition):
Adjustment for Accumulated Profits and Losses – “Sometimes a firm may have accumulated profits not yet transferred to capital accounts of the partners. These are usually in the form of general reserve, reserve and/or Profit and Loss Account. The new partner is not entitled to have any share in such accumulated profits. These are distributed among the partners by transferring it to their capital current accounts in old profit sharing ratio.”

NCERT (2026-27 edition):
When the new partner does not bring goodwill in cash, partly or fully – “… When goodwill exists in the books : Goodwill appearing in the books will be written-off by debiting old partners ‘capital accounts in their old profit sharing ratio. Thereafter new value of goodwill will be given effect by crediting sacrificing partners' capital accounts and debiting new partners’ current account.”