Asset Revaluation

Correct answer: A. Credit ₹12000

The provision was ₹12000 more than the actual claim. Excess provision is a gain and will be credited to Revaluation Account.

Correct answer: C. ₹400 loss

The obsolete goods cause a loss of ₹10,000. The remaining stock is ₹90,000 − ₹10,000 = ₹80,000, and a 12% increase on it gives a gain of ₹9,600. Therefore, the net effect is ₹9,600 − ₹10,000 = ₹400 loss. Option A considers only the increase in the remaining stock and ignores the loss on obsolete goods. Exam tip: calculate each revaluation adjustment separately before offsetting gains against losses.

Correct answer: A. ₹24,000

A revaluation profit arising on the admission of a partner is credited to the old partners’ capital or current accounts in their old profit-sharing ratio. The total ratio is 4 + 3 + 2 = 9, and B’s share is 3/9. Therefore, the amount credited to B is ₹72,000 × 3/9 = ₹24,000. Exam tip: distribute revaluation profit in the old ratio, not in the new partner’s ratio.

Correct answer: B. ₹28,000

A revaluation loss is debited to the partners’ Capital Accounts in their old profit-sharing ratio. The total ratio is 13 + 7 = 20, and Y’s share is 7 parts. Therefore, Y’s debit = ₹80,000 × 7/20 = ₹28,000. ₹40,000 would result from an equal division, which is not applicable to the given 13:7 ratio. Exam tip: Distribute revaluation profit or loss in the old ratio unless the question specifies otherwise.

Correct answer: C. ₹25500 gain

An unrecorded asset discovered at admission is a gain because the firm receives an economic resource that was absent from its books. The unrecorded copyright adds ₹38,000. An unrecorded bonus liability is an obligation that the firm must recognize, so it is a loss of ₹12,500.

The net revaluation result is found by offsetting the liability against the asset gain: \\(₹38,000-₹12,500=₹25,500\\). Since the asset gain is larger, the balance is a net gain, not a loss. Therefore option C, ₹25,500 gain, is correct. Adding both amounts would ignore the liability’s adverse effect and produce the incorrect figure ₹50,500.

Correct answer: C. ₹78,000

Decrease in the building value = ₹6,00,000 − ₹5,40,000 = ₹60,000. The unrecorded property tax liability of ₹18,000 is also debited to the Revaluation Account as a loss. Therefore, total revaluation loss = ₹60,000 + ₹18,000 = ₹78,000. ₹60,000 represents only the decrease in the building value and excludes the liability. Exam tip: Add every unrecorded liability to the revaluation loss.

Correct answer: B. ₹11,750 profit

A Revaluation Account shows a profit when its credit side exceeds its debit side. Profit = ₹2,10,500 − ₹1,98,750 = ₹11,750. Therefore, the result is a revaluation profit of ₹11,750, which is transferred to the old partners’ Capital or Current Accounts in their old profit-sharing ratio at the time of admission. Option A reverses the direction of the difference. Exam tip: excess of credit over debit means profit; excess of debit over credit means loss.

Correct answer: C. Recognition of unrecorded liability

Recognition of an unrecorded liability increases the firm's obligation. Increase in liability is a loss and appears on the debit side.

Correct answer: B. Discovery of unrecorded asset

Discovery of an unrecorded asset increases the firm's assets. It is a gain and is credited to Revaluation Account.

Correct answer: C. ₹34000

The correct answer is C: ₹34,000. Machinery falls from ₹320,000 to ₹296,000, so the reduction is ₹320,000 − ₹296,000 = ₹24,000. Because an asset has decreased, this amount is debited to Revaluation Account. In addition, an extra depreciation provision of ₹10,000 is required on the same machinery. That provision is also a revaluation expense and is debited. Total debit = ₹24,000 + ₹10,000 = ₹34,000. Option A incorrectly adds only part of the information. Option B is only the machinery reduction and ignores the additional provision. Option C includes both required debits and is correct. Option D includes only the provision and ignores the fall in machinery value. Exam cue: when two separate decreases or provisions affect revaluation, add both debit amounts.

Correct answer: B. ₹8000 remaining fund gain

Decrease in investments is ₹10000 and it will be covered by the fund. The remaining fund ₹8000 is a gain for old partners.

Correct answer: A. ₹6,000 हानि

The governing concept is that decreases in asset values are revaluation losses and increases are revaluation gains. Patent falls from ₹96,000 to ₹72,000, so the loss is ₹96,000 − ₹72,000 = ₹24,000. Trademark rises from ₹50,000 to ₹68,000, so the gain is ₹68,000 − ₹50,000 = ₹18,000. Offsetting the two effects gives ₹24,000 loss − ₹18,000 gain = ₹6,000 net loss. Therefore option A is correct. Option B reverses the final result, option C counts only the patent decrease while ignoring the trademark gain, and option D counts only the trademark increase rather than the combined revaluation effect.

Correct answer: B. ₹50000 profit

In the memorandum method the second part gives the reverse effect of the first part. So the first loss becomes profit in the second part.

Correct answer: C. In old profit sharing ratio

The first part is like real revaluation and relates to the pre-admission position. Therefore it is shared by old partners in the old ratio.

Correct answer: A. ₹4000

The result of the second part goes to all partners in the new ratio. C's share is ₹32000 × 1/8 = ₹4000.

Correct answer: A. ₹35000 gain

Licence is an unrecorded asset and gives a gain of ₹44000. After reducing renewal liability the net gain is ₹35000.

Correct answer: C. Credit ₹22000

Decrease in creditors by ₹22000 is a gain for the firm. When liability decreases Revaluation Account is credited.

Correct answer: B. Debit ₹36000

Prepaid advertisement is an asset and must be written off when its benefit expires. Writing off an asset is debited to Revaluation Account.

Correct answer: B. Debit Claim Receivable Account and credit Revaluation Account

The claim receivable is an asset. When an unrecorded asset is brought into books Revaluation Account is credited.

Correct answer: C. Credit ₹4500

Liability decreased by ₹4500 so it is a gain for the firm. Decrease in liability is credited to Revaluation Account.

Correct answer: A. ₹14400

Bad debts are ₹12000 and new provision on ₹168000 is ₹8400. After old provision ₹6000, extra provision is ₹2400 so total loss is ₹14400.

Correct answer: A. ₹21,000

The governing concept is revaluation of assets at the time of admission. An increase in the plant’s book value is a revaluation gain, while an installation expense is a revaluation loss if it is paid in connection with bringing the asset to its revised condition. The increase in plant value is ₹275,000 − ₹250,000 = ₹25,000. After deducting the installation expense of ₹4,000, the net gain is ₹25,000 − ₹4,000 = ₹21,000. Therefore, option A is correct. ₹25,000 ignores the expense, ₹29,000 incorrectly adds the expense to the gain, and ₹4,000 considers only the expense rather than the overall revaluation result.

Correct answer: A. ₹22000

The new partner should not receive any share of revaluation profit. Equal distribution wrongly credited him with ₹22000.

Correct answer: A. ₹6000 less debit

The first partner's correct loss is ₹52000 × 8/13 = ₹32000 but equal sharing debited ₹26000. So he was debited ₹6000 less.

Correct answer: B. Credit Revaluation ₹2200

Increase in bank balance by ₹2200 is an increase in asset. Therefore it is a gain and will be credited to Revaluation Account.