At the time of retirement of Mahesh, value of stock is given as Rs 60,000 in the balance sheet of the firm. Pass a journal entry when stock is found undervalued by Rs 15,000.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Stock A/c Dr. 15,000; To Revaluation A/c 15,000
On retirement, assets are brought to their correct values through the Revaluation Account. Stock “undervalued by Rs. 15,000” means its true value is Rs. 15,000 more than the book figure of Rs. 60,000, so the stock must be increased by Rs. 15,000.
Book value = Rs. 60,000
True value = Rs. 60,000 + Rs. 15,000 = Rs. 75,000
Increase = Rs. 15,000
Stock A/c Dr. 15,000
To Revaluation A/c 15,000
Stock is debited because the asset goes up. The increase in an asset is a gain, so Revaluation A/c is credited; the net gain is later shared by all the partners, the retiring partner Mahesh included, in the old ratio. Only the increase of Rs. 15,000 is recorded, since the stock already stands in the books at Rs. 60,000.
NCERT (2026-27 edition):
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