If only market value of an old asset changes at admission but book value is not yet changed why may Revaluation Account be needed?

Correct answer: To recognise gain or loss of old partners

The direct answer is Option A: Revaluation Account may be needed to recognise the gain or loss belonging to the old partners. A book value is the amount currently shown in the books, while market value is the amount the asset may currently be worth. On admission, an old asset may have a changed market value even if the books have not yet been permanently changed. The difference represents a gain or loss that arose before the new partner joined. Revaluation Account records this difference and transfers the net result to the old partners, so the incoming partner does not receive an unfair share of an old gain or bear an old loss. Option A is correct. Option B is wrong because the account is not primarily made to reduce the new partner’s capital. Option C is wrong because it has no purpose of closing the bank account. Option D is wrong because valuation does not require selling all assets. The account can record an adjustment without any actual sale. Exam cue: revaluation protects the old partners’ claim over changes existing before admission.