Asset Revaluation

Increase in asset value is a profit so it is credited to Revaluation Account. In exams treat asset increase as gain.

Decrease in asset value is a loss so Revaluation Account is debited. Only the difference is recorded.

Reduction in liability creates a gain so Revaluation Account is credited. In exams remember liability decrease means profit.

Revaluation profit is distributed among old partners in the old profit sharing ratio. Divide ₹48000 in 5:3.

Unrecorded income receivable is like an asset and creates gain so it is credited. Treat receivable income as profit in exams.

Creating an unrecorded liability causes loss so Revaluation Account is debited. Such items affect old partners.

Bringing an unrecorded asset into books is a gain. Hence asset is debited and Revaluation Account is credited.

An unrecorded liability is created by crediting it and the loss is debited to Revaluation Account. Liability will be credited in journal.

Increase in provision is a loss and only the extra ₹2000 is debited. Do not record the whole provision again.

A reduction in the provision decreases the liability, so it is treated as a gain and credited to the Revaluation Account. Gain = ₹8,000 − ₹5,500 = ₹2,500. Therefore, ₹2,500 is credited to the Revaluation Account. Exam tip: an increase in a provision is a loss, while a decrease is a gain.

The ₹9,000 increase in stock is a revaluation gain, whereas the ₹6,000 decrease in furniture is a revaluation loss. Therefore, the net result is ₹9,000 − ₹6,000 = ₹3,000 profit, which is credited to the Revaluation Account. The ₹15,000 option results from incorrectly adding the gain and loss instead of offsetting them. In the exam, treat an increase in an asset as a gain and a decrease as a loss, then calculate the net difference.

Credit side is higher so there is revaluation profit. The difference ₹12000 is distributed among old partners.

When debit is higher there is loss and it is debited to old partners in old ratio. New partner does not bear old revaluation changes.

The increase in the building’s value is a revaluation gain, whereas the decrease in debtors is a revaluation loss. Thus, net revaluation profit = ₹24,000 − ₹9,000 = ₹15,000. A’s share = ₹15,000 × 7/12 = ₹8,750 profit. ₹15,000 is the total revaluation profit, not A’s individual share. Exam tip: Revaluation profit or loss is transferred to the old partners in their old profit-sharing ratio.

Revaluation Account finds profit or loss from changes in old values. The result goes to old partners in old ratio.

New partner cash capital is recorded in capital account separately. Revaluation is only for changes in old assets and liabilities.

A claim receivable is an asset and creates gain. So claim is debited and Revaluation Account is credited.

The fall in the investment value from ₹60,000 to ₹54,000 results in a loss of ₹6,000. Recognising the separately receivable accrued interest of ₹2,000 as an asset gives a gain of ₹2,000 in revaluation. Therefore, the net effect is ₹6,000 loss − ₹2,000 gain = ₹4,000 loss. The ₹6,000 loss option ignores the gain from accrued interest. Exam tip: Calculate the change in the investment value and the separately recognised accrued interest independently before determining the net revaluation result.

The correct answer is B: ₹11,500. The stock is currently recorded at ₹18,000, but its realisable value is only ₹6,500. It must therefore be reduced by the difference: ₹18,000 − ₹6,500 = ₹11,500. This reduction is a fall in an asset’s value, so Stock Account is credited and Revaluation Account is debited by ₹11,500. Option A gives only the new value, not the loss. Option B gives the exact decrease and is correct. Option C adds the two figures, which is not the required comparison. Option D gives the old book value rather than the amount of reduction. Memory cue: revaluation loss on an asset equals old book value minus revised value when the revised value is lower.

The ₹30,000 increase in the building’s value is recorded as a gain in the Revaluation Account. The ₹5,000 decrease in the loan is also a gain because a reduction in liability increases the firm’s net assets. Therefore, the combined revaluation profit is ₹30,000 + ₹5,000 = ₹35,000. The ₹25,000 option results from considering only one of the two adjustments. Exam tip: an increase in an asset and a decrease in a liability generally create a revaluation gain.

Revaluation relates to changes in old values so its effect belongs to old partners. The new partner is not charged with old loss.

Revaluation profit is distributed among the old partners in their old profit-sharing ratio. B’s share is \(\frac{2}{3+2}=\frac{2}{5}\). Therefore, the credit to B’s Capital Account is ₹25,000 × \(\frac{2}{5}\) = ₹10,000. ₹15,000 is A’s share, whereas ₹12,500 would arise only if the profit were divided equally. Exam tip: On admission of a partner, distribute revaluation profit or loss among the old partners in their old ratio.

The decrease in office equipment is ₹33,000 − ₹27,500 = ₹5,500, which is a loss to the Revaluation Account. The increase in outstanding expenses is ₹15,000 − ₹12,000 = ₹3,000 and also represents a loss because the liability has increased. Therefore, the total net loss is ₹5,500 + ₹3,000 = ₹8,500. ₹2,500 results from incorrectly subtracting the adjustments, while ₹5,500 ignores the increase in the liability. Exam tip: A decrease in an asset and an increase in a liability are both treated as losses in revaluation.

Revaluation Account records the difference and the revised value appears in balance sheet. Avoid double counting.

The increase in the investment value is ₹96,000 − ₹88,000 = ₹8,000, which is a revaluation gain. The payable expense of ₹3,500 is treated as a loss in the Revaluation Account. Therefore, the net effect is ₹8,000 − ₹3,500 = ₹4,500 profit. Option A ignores the expense, while option D incorrectly adds the expense to the gain. Exam tip: subtract revaluation-related expenses from increases in asset values to determine the net effect.