At the time of a partner’s admission, if the revaluation loss is debited to the old partners’ capital accounts, what will be its effect on their capital?

Correct answer: Capital will decrease

Revaluation loss is debited to the old partners’ capital accounts, which reduces the balance of those accounts. Therefore, their capital decreases. In contrast, revaluation profit is credited and increases capital. Exam tip: remember loss as debit and profit as credit in the Revaluation Account.