Which statement about Revaluation Account is incorrect?

Correct answer: It distributes old profit to new partner

The direct answer is Option A: it is incorrect to say that Revaluation Account distributes old profit to the new partner. Revaluation Account is prepared when the partnership changes, especially on admission. It records increases and decreases in the values of assets and liabilities and then shows the resulting net revaluation profit or loss. That result belongs to the partners who were present before the change, because the change in old assets and liabilities relates to the old period. Option A is therefore incorrect: the new partner does not receive old revaluation profit. Option B is correct because asset changes, such as an increase in building value or decrease in stock value, are recorded there. Option C is correct because liability changes are also recorded; an increase in liability is a loss and a decrease is a gain. Option D is correct because the account is balanced to find net profit or loss. Do not confuse revaluation profit with future business profit, which may be shared by the new ratio.