Asset Revaluation

Correct answer: A. To adjust old partners' gain or loss

Revaluation adjusts gains or losses existing before admission among old partners. Remember that it is shared in the old ratio.

Correct answer: B. Credit side

Increase in asset value is a gain for the firm so it is credited to Revaluation Account. Treat appreciation as a gain in exams.

Correct answer: B. Debit side

Decrease in asset value is a loss for the firm so it is debited. Link fall in asset value with loss in exams.

Correct answer: C. Old partners in old ratio

Revaluation profit belongs to the period before admission so it belongs to old partners. Share it in the old profit-sharing ratio.

Correct answer: C. Old profit-sharing ratio

Revaluation loss relates to the period before admission so old partners bear it in the old ratio. Do not include the new partner.

Correct answer: B. ₹10000

The increase is ₹10000 and it is a gain. In exams only the difference amount is recorded not the full value.

Correct answer: A. ₹6,000 debit

The governing concept is that a decrease in the book value of an asset represents a loss on revaluation. The reduction is calculated as: original value ₹30,000 minus revised value ₹24,000 = ₹6,000. Since this loss reduces the firm’s net assets, ₹6,000 is debited to the Revaluation Account. It is ultimately transferred to the capital accounts of the old partners in their old profit-sharing ratio. Option B is incorrect because a credit represents a gain, which would arise from an increase in asset value. Options C and D use the wrong amount and do not represent the change in value.

Correct answer: A. Asset Account Dr and Revaluation Account Cr

An unrecorded asset is brought into books so the asset is debited and gain is credited. Treat it as a gain.

Correct answer: B. Revaluation Account Dr and Liability Account Cr

An unrecorded liability is a loss for the firm so Revaluation Account is debited. Treat creation of liability as a loss.

Correct answer: B. It will be debited

A new provision reduces the realizable value of debtors so it is a loss. Debit creation of provision in exams.

Correct answer: B. It will be credited

Reduction in provision decreases a charge or liability so it is a gain. Credit reduction in provision.

Correct answer: A. Revaluation profit

Direct answer: A credit balance of the Revaluation Account means a revaluation profit, so option A is correct. Revaluation records increases or decreases in assets and liabilities at the time of reconstitution. Asset increases and liability decreases are credited because they create gains; asset decreases and liability increases are debited because they create losses. If the credit total is greater than the debit total, the difference is a profit. This profit is transferred to the old partners’ capital or current accounts in their old profit-sharing ratio. Option B is wrong because a debit balance, not a credit balance, represents revaluation loss. Option C is unrelated: cash shortage is a separate adjustment. Option D is also unrelated because a new partner’s capital is recorded in the partner’s capital account, not represented by the revaluation balance. Exam cue: credit excess means gain; debit excess means loss.

Correct answer: B. Revaluation loss

The governing rule is that the balance of the Revaluation Account represents the net result of changes in assets and liabilities. If the debit side exceeds the credit side, the account has a debit balance and the result is a revaluation loss. This loss is transferred to the capital accounts of the old partners in their old profit-sharing ratio. Therefore, option B is correct. A credit balance would indicate a revaluation profit, so option A reverses the accounting treatment. An unrecorded asset is only one possible item affecting the account and does not define a debit balance; cash profit is unrelated to this specific account.

Correct answer: B. Revaluation Account Dr and Old Partners' Capital Accounts Cr

To distribute profit the Revaluation Account is debited to close it. Profit is credited to capital accounts.

Correct answer: A. Old Partners' Capital Accounts Dr and Revaluation Account Cr

Loss reduces old partners' capital so their capital accounts are debited. Debit loss to capital accounts.

Correct answer: C. ₹6000

Revaluation profit is distributed among the old partners in their old profit-sharing ratio. Amit's share is \(₹10000 \times \frac{3}{3+2} = ₹6000\), so option C is correct. ₹5000 represents one-half of the total profit, whereas Amit is entitled to 3 out of 5 parts. Exam tip: distribute revaluation profit or loss in the old ratio, not the new ratio.

Correct answer: B. ₹4,000 each

Revaluation profit or loss is transferred to the partners’ capital or current accounts in their old profit-sharing ratio. Since Reena and Meena share equally, the ₹8,000 loss is divided into two equal parts: ₹8,000 ÷ 2 = ₹4,000. Thus option B is correct. The other options either divide the loss incorrectly or assign the entire loss to each partner.

Correct answer: A. Nominal account

Revaluation Account is prepared to find profit or loss so it is a nominal account. Remember nominal account rules.

Correct answer: A. Building Account

When building value increases Building Account is debited and Revaluation Account is credited. Debit the asset when it increases.

Correct answer: A. Stock Account

When stock value falls Revaluation Account is debited and Stock Account is credited. Credit the asset when it decreases.

Correct answer: B. Credit

A decrease in liability is a gain for the firm so Revaluation Account is credited. Treat liability reduction as gain.

Correct answer: B. Debit

An increase in liability increases burden on the firm so it is a loss. Debit Revaluation Account when liability increases.

Correct answer: A. ₹2000 credit

Reduction in creditors by ₹2000 is a gain so it is credited to Revaluation Account. Liability decrease is a gain.

Correct answer: B. Unrecorded liability

Outstanding salary is a liability and when recorded first it is an unrecorded liability. Debit it to Revaluation Account.

Correct answer: B. Revaluation Account will be credited

Unrecorded investments are assets so they are credited as a gain in Revaluation Account. Treat unrecorded asset as gain.