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Revaluation of Assets and Liabilities

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REVALUATION OF ASSETS AND LIABILITIES


The actual value of the assets and liabilities may be different from their book value as shown by the balancesheet. So Revaluation account is prepared at the time of admission of a new partner to record any increase/decrease in the value of assets and liabilities.The value of some assets may increase with time and some may show a decrease. Similarly some liabilities may also show a increase/decrease in the value. The Revaluation account is credited if there is an increase in the value of assets or decrease in the value of liabilities. On the other hand it is debited if there is any decrease in the value of assets or an increase in the value  of liabilities. This account is a nominal account and is sometimes also called Profit and Loss adjustment account. The profit or Loss arising due to revaluation is devided among the old partners in their old ratio.

Journal Entreies to be peassd at the time of Revaluation:

(1) If there is an decrease in the vale of assets:

Revaluation A/C  Dr.

To Sundry Assets A/C


(2) If there is an increase in the value of assets:

Sundary Assets A/C Dr.

 To Revauation A/C


(3) If there is any Increase in the value of Liabilities:

Revaluation A/C Dr.

 To Sundary Liabilities A/C


(4) If there is any decrease in the value of Liabilities:

Sundary Liabilities A/C Dr.

To Revaluation A/C


(5) If Revaluation account shows profit i.e. the total of credit side is more than the debit side:

Revaluation A/C Dr.

 To Old Partners' Capital A/Cs (in the old ratio)


(6) If Revaluation account shows Loss i.e. the total of debit side is more than the credit side:

Old Partners' Capital A/Cs  Dr.

To Revaluation A/C