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During reconstitution, an asset decreases in value by ₹6,500 and a liability increases by ₹2,500. What will be the total loss in the Revaluation Account?

Answer and explanation

Correct answer: ₹9,000

A decrease in an asset’s value of ₹6,500 and an increase in a liability of ₹2,500 are both losses recorded on the debit side of the Revaluation Account. Therefore, total loss = ₹6,500 + ₹2,500 = ₹9,000. Choosing ₹4,000 would incorrectly subtract the two amounts. Exam tip: add asset decreases and liability increases when calculating revaluation loss.

Related tags

Revaluation AccountAsset RevaluationLiability IncreasePartnership AccountsNumerical AccountingReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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