Question

Which of the following would affect the Revaluation Account at the time of admission of a partner?
(A) Increase in assets
(B) Drawings against capital
(C) Recording of unrecorded assets
(D) Decrease in liabilities

• A. (A), (C), and (D) only
• B. (A), (B), and (D) only
• C. (A), (B), and (C) only
• D. (B), (C), and (D) only

Answer 1

The Correct Option is C

Upon admitting a new partner, firms typically revalue assets and liabilities to update the balance sheet. The Revaluation Account is utilized for this process. The following options impact the Revaluation Account:

(A) Increase in assets: An increase in asset value results in a gain, which is recorded in the Revaluation Account.

(B) Drawings against capital: This is a personal transaction affecting the Capital Account, not the Revaluation Account.

(C) Recording of unrecorded assets: The recognition of previously unrecorded assets constitutes an increase in assets and is recorded as a gain in the Revaluation Account.

(D) Decrease in liabilities: A reduction in liabilities signifies a favorable change, recognized as a gain in the Revaluation Account.

Option	Affected
(A) Increase in assets	Yes
(B) Drawings against capital	No
(C) Recording of unrecorded assets	Yes
(D) Decrease in liabilities	Yes

Consequently, options (A), (C), and (D) affect the Revaluation Account.