Asset Revaluation

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

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.

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.

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.

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.

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.

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.

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

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

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.

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

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.

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.

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.

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

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

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

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

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

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

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

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.

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

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

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