At the time of admission of a new partner, the accountant debited an increase of ₹17,000 in the value of an asset to the Revaluation Account. Why is this entry incorrect?

Correct answer: An increase in an asset’s value is a revaluation gain and is credited to the Revaluation Account

An increase in the value of an asset is a revaluation gain for the firm. The correct entry is: Asset Account Dr. ₹17,000 and Revaluation Account Cr. ₹17,000. The resulting revaluation profit is ultimately distributed among the old partners’ Capital or Current Accounts in their profit-sharing ratio; it is not credited directly to the new partner. Exam tip: An asset increase is credited to the Revaluation Account, whereas an asset decrease is debited to it.