Asset Revaluation

Revaluation Account is only for changes in values of assets and liabilities. Do not include normal sales in it.

The gain on revaluation is the difference between the revised value and the old value: ₹22,000 − ₹18,000 = ₹4,000. ₹22,000 is the revised value of the equipment, not the gain. Exam tip: calculate only the increase or decrease in value as the revaluation gain or loss.

The decrease in furniture is ₹5000 so it is a loss. Debit Revaluation Account when asset decreases.

Only the increase or decrease amount is recorded in Revaluation Account. Do not record the full asset value.

New provision reduces the realizable value of debtors so it is a loss. Debit the new provision.

Creating provision reduces value of debtors so it is a loss. Put it on debit side of Revaluation Account.

The reduction in provision is ₹800 so it is a gain. Credit Revaluation Account when provision decreases.

The provision decreases from ₹2500 to ₹1800, resulting in a decrease of ₹700. A decrease in provision is a gain, so ₹700 is credited to the Revaluation Account. A ₹700 debit would be incorrect because an increase in provision is debited. Exam tip: subtract the new provision from the old provision to find the difference.

Increase in provision = ₹1,700 − ₹1,000 = ₹700. This increase represents a loss to the business, so ₹700 is debited to the Revaluation Account. The entire new provision of ₹1,700 is not recorded; only the increase is considered. Exam tip: calculate the difference between the new and old provisions—an increase is debited, while a decrease is credited.

The increase in the asset occurred before the new partner joined, so the resulting revaluation profit belongs to the old partners. It is credited to their capital or current accounts in the old profit-sharing ratio. The new partner is not entitled to a profit earned before admission. Exam tip: Distribute revaluation profit or loss arising before admission in the old ratio.

Cash is a current asset. If cash is discovered but was not previously included in the books, recording it increases the firm’s recognised assets by ₹2,000. The discovery therefore creates a revaluation gain, not a loss or a liability. The accounting entry would debit Cash Account and credit Revaluation Account for ₹2,000. The credit is used because the newly recognised asset improves the firm’s net position. Drawings refer to amounts withdrawn by a partner and have no connection with the discovery of business cash. Thus, the correct effect is a gain, which is ultimately transferred to the partners in their old profit-sharing ratio.

Cash is an asset so it is debited and the gain is credited to Revaluation Account. Use this entry for unrecorded assets.

Outstanding electricity bill is a liability so it is a loss for the firm. Debit it to Revaluation Account.

When an unrecorded liability is created Revaluation Account is debited. Credit the liability account.

Prepaid rent gives future benefit so it is an asset. Credit unrecorded asset to Revaluation Account.

Income received in advance is treated as a liability because the firm has received money but still owes goods, services, or an appropriate adjustment to the customer. If this liability decreases from ₹2,400 to ₹1,800, the reduction is ₹2,400 − ₹1,800 = ₹600. A decrease in liability benefits the firm because its outstanding obligation becomes smaller. Consequently, the reduction produces a revaluation gain of ₹600, and the Revaluation Account is credited by that amount. The figures ₹2,400 and ₹1,800 are balances, not the gain itself. Therefore, neither a ₹1,800 loss nor a ₹2,400 gain correctly expresses the effect.

A loan is a liability. The increase is ₹54,000 − ₹50,000 = ₹4,000, and an increase in a liability represents a loss in the Revaluation Account; therefore, ₹4,000 is debited. Option B shows the opposite treatment, while ₹50,000 and ₹54,000 are the total loan amounts, not the increase. Exam tip: Debit an increase in liability and credit a decrease in liability in the Revaluation Account.

Decrease in loan = ₹36,000 − ₹33,000 = ₹3,000. A loan is a liability, and a decrease in liability is a gain for the firm; therefore, ₹3,000 is recorded on the credit side of the Revaluation Account. A debit would be recorded if the liability increased or an asset decreased. Exam tip: decrease in liability means credit to the Revaluation Account.

Trademark is an unrecorded asset so it is a gain. Unrecorded intangible asset is also credited.

Copyright is an asset and its decrease by ₹5000 is a loss. Debit even when intangible asset decreases.

Direct answer: An increase in an intangible asset is credited to Revaluation Account as a gain, so option A is correct. Intangible assets have no physical form, but they still provide economic value; examples include copyright, patents and goodwill. In revaluation, an increase in any asset raises the value of the firm. Therefore the asset account is debited to show its higher value, and Revaluation Account is credited because the increase is a gain. Option B is wrong because an asset increase is not a loss; an asset decrease would be debited as a loss. Option C is wrong because a stated increase requires an entry. Option D is wrong because revaluation gain belongs to the old partners in their old ratio, not directly to the new partner. The answer applies to both tangible and intangible assets. Memory cue: every asset increase is a credit gain in revaluation.

The direct answer is Option A: a decrease in an intangible asset is debited to the Revaluation Account as a loss. An intangible asset is a non-physical asset, such as goodwill, a patent, or a trademark. When its value falls, the business has suffered a decrease in its asset value. The loss is therefore recorded on the debit side. For example, if goodwill falls by ₹10,000, Revaluation Account is debited by ₹10,000. Option A is correct because every fall in an asset value is a loss for the firm. Option B is wrong because a credit normally records a gain, whereas this is a loss. Option C is wrong because the amount is not directly credited to capital; after finding the revaluation result, the net profit or loss is transferred to the appropriate old partners’ capital or current accounts. Option D is wrong because no bank payment or bank balance is involved merely because the asset value has decreased. Remember: decrease in asset means debit; increase in asset means credit.

A revaluation profit is credited to the old partners in their old profit-sharing ratio. Total ratio parts = 3 + 2 = 5, so the second partner’s share = ₹15000 × 2/5 = ₹6000. ₹9000 is the first partner’s share, while ₹7500 would result from an equal division. Exam tip: divide the second partner’s ratio part by the total ratio and multiply by the total profit.

A revaluation loss is distributed among the old partners in their old profit-sharing ratio. The total parts are \(4+5=9\). The first partner’s loss is \(₹18,000 \times \frac{4}{9}=₹8,000\). ₹10,000 is the loss of the second partner, not the first. Exam tip: Always distribute revaluation profit or loss in the old ratio.

Revaluation profit belongs to the old partners because it arises from changes in asset and liability values before the new partner becomes entitled to profits. It is distributed in the old profit-sharing ratio 2:2:1. The total ratio is \\(2+2+1=5\\) parts, so the third partner receives one of the five parts.

The third partner’s share is therefore \\(₹25,000\\times1/5=₹5,000\\). Hence option A is correct. Each of the first two partners would receive ₹10,000, but the question asks only for the third partner. The admission of a new partner does not change the ratio used for allocating a revaluation profit already earned by the old firm.