Asset Revaluation

Revaluation account shows profit or loss from revised values of assets and liabilities. In exams link it with old partners.

Land is an asset and increase in asset is a gain. Therefore only the increase ₹55000 is credited to revaluation account.

Decrease in asset is a loss and revaluation account is debited. The decrease is (65000-52000=₹13000).

Decrease in liability is a gain for the firm. Therefore ₹15000 will be credited to revaluation account.

Direct answer: Revaluation Account is debited by ₹8,000, so option A is correct. Outstanding expenses are a liability. The liability first stood at ₹22,000 and becomes ₹30,000. The increase is ₹30,000−₹22,000=₹8,000. An increase in liability is a loss because the firm now owes more. Therefore Revaluation Account is debited by ₹8,000 and the outstanding-expenses liability is credited or increased by ₹8,000. Option B is wrong because credit treatment applies to a decrease in liability, which would be a gain. Option C is wrong because only the increase, not the whole revised balance, is the revaluation adjustment. Option D is wrong because the change creates a definite loss. Exam cue: liability increase equals debit to Revaluation Account; liability decrease equals credit.

Unrecorded machinery is an asset so machinery account is debited. Revaluation account is credited because it is a gain.

Unrecorded repairs payable is a liability and recording it causes a loss. Therefore revaluation account is debited.

Revaluation relates to the firm before admission. Therefore its profit is distributed among old partners in old ratio.

Revaluation loss is the loss of the old firm. Therefore it is debited to old partners' capital in old ratio.

A revaluation profit is distributed among the old partners in their old profit-sharing ratio. A’s share is \(\frac{2}{2+1}=\frac{2}{3}\). Therefore, the amount credited to A is \(₹36,000 \times \frac{2}{3}=₹24,000\). ₹12,000 is B’s one-third share, not A’s share. Exam tip: Revaluation profit or loss is divided in the old partners’ old ratio, not in the new ratio.

A revaluation loss is distributed among the old partners in their old profit-sharing ratio. B’s share is \(5/(3+5)=5/8\). Therefore, B’s loss is \(₹48,000 \times 5/8 = ₹30,000\), which is debited to B’s Capital Account. ₹18,000 is A’s share because A’s ratio is 3/8. Exam tip: At the time of reconstitution, distribute revaluation profit or loss in the old profit-sharing ratio.

When an asset increases the related asset account is debited. Revaluation account will be credited by ₹8500.

When an asset decreases the related asset account is credited. Revaluation account will be debited by ₹8000.

The new provision for doubtful debts is ₹1,50,000 × 6% = ₹9,000. Since the provision reduces the value of the debtors, it is debited to the Revaluation Account as a loss. ₹1,41,000 is the value of debtors after deducting the provision, not the loss. Exam tip: A newly created provision is treated as a revaluation loss.

Increase in provision = ₹15,000 − ₹12,000 = ₹3,000. An increase in provision effectively reduces the value of the asset, so it is treated as a loss and debited to the Revaluation Account. The entire new provision of ₹15,000 is not recorded; only the increase is considered. Exam tip: Increase in provision is debited, while a decrease is credited.

The concept is that a provision is compared with the newly required amount when assets and liabilities are revalued. The existing provision is ₹18,000, whereas only ₹12,500 is required after revaluation. The provision therefore decreases by ₹18,000 − ₹12,500 = ₹5,500. A reduction in a liability or reduction in a provision releases an earlier charge and increases the firm’s net worth; it is consequently treated as a revaluation gain and credited to the Revaluation Account. A debit would be required if the new provision were higher than the old provision. The amount ₹12,500 is the closing provision, not the revaluation gain.

Direct answer: The correct entry is option A: Copyright Account Dr. ₹32,000; To Revaluation Account ₹32,000. Copyright is an intangible asset. It was previously unrecorded, so recording it increases the firm’s assets. The copyright account is debited because an asset coming into the books is debited. Revaluation Account is credited because the previously omitted asset creates a revaluation gain. Option B reverses the normal treatment and would incorrectly show a loss. Option C is wrong because no cash is received or paid merely by recording an unrecorded copyright. Option D is wrong because the partners’ capital accounts are adjusted only after calculating the revaluation result; copyright is not directly debited to the new partner. The amount is ₹32,000, so that exact amount is used. Memory cue: unrecorded asset found: asset Dr., Revaluation Cr.

Unrecorded legal claim is a liability and recording it creates a loss. Therefore revaluation account is debited.

The ₹70,000 increase in the building is a revaluation gain, while the ₹22,000 decrease in equipment is a revaluation loss. Therefore, net revaluation profit = ₹70,000 − ₹22,000 = ₹48,000. The ₹92,000 option is incorrect because it adds the gain and loss instead of offsetting them. Exam tip: Treat an increase in an asset as a gain and a decrease as a loss, then find the net difference.

Decrease in stock is a loss of ₹26000 and decrease in creditors is a gain of ₹31000. Net profit is ₹5000.

The governing rule is that an unrecorded asset discovered during reconstitution is a gain, whereas an unrecorded liability is a loss. The asset increases the firm’s net resources by ₹42,000, but the liability creates an obligation of ₹36,000. The net effect is therefore calculated as ₹42,000 − ₹36,000 = ₹6,000. Since the asset benefit exceeds the liability burden, the result is a net revaluation profit of ₹6,000. The liability would be treated as a debit item and the asset as a credit item in the Revaluation Account. Option B reverses the comparison, option C adds both gross amounts, and option D ignores the required accounting adjustment.

A Revaluation Account shows a profit when its credit total exceeds its debit total. Profit = ₹1,05,000 − ₹76,000 = ₹29,000. Therefore, the result is a revaluation profit of ₹29,000, which is transferred to the old partners’ capital accounts in their profit-sharing ratio. Exam tip: a higher credit total means profit, while a higher debit total means loss.

A Revaluation Account shows a loss when its debit total exceeds its credit total. Loss = ₹87,000 − ₹59,000 = ₹28,000. Therefore, the correct result is a loss of ₹28,000. ₹1,46,000 is the sum of the two totals, not their difference. Exam tip: higher debit total means loss, while higher credit total means profit.

Revaluation corrects the position of the old business. Therefore its profit is given to old partners.

Warehouse is an asset and increase in its value is a gain. It will be credited to revaluation account.