Match List-I with List-II
List-I List-II Revaluation of assets and reassessment of liabilities at the time of admission of a new partner Journal Entry (A) For increase in the value of an asset (I) Revaluation A/c Dr. To Asset A/c (B) For reduction in the amount of a liability (II) Revaluation A/c Dr. To Liability A/c (C) For reduction in the value of an asset (III) Asset A/c Dr. To Revaluation A/c (D) For appreciation in the amount of a liability (IV) Liability A/c Dr. To Revaluation A/c
Choose the correct answer from the options given below:
Match List-I with List-II
| List-I | List-II |
|---|---|
| Revaluation of assets and reassessment of liabilities at the time of admission of a new partner | Journal Entry |
| (A) For increase in the value of an asset | (I) Revaluation A/c Dr. To Asset A/c |
| (B) For reduction in the amount of a liability | (II) Revaluation A/c Dr. To Liability A/c |
| (C) For reduction in the value of an asset | (III) Asset A/c Dr. To Revaluation A/c |
| (D) For appreciation in the amount of a liability | (IV) Liability A/c Dr. To Revaluation A/c |
Choose the correct answer from the options given below:
Solution
When revaluing assets and liabilities at the time of admission of a new partner, the Revaluation Account is used to record all gains and losses. The key principle is: gains are credited to Revaluation A/c and losses are debited to Revaluation A/c.
(A) For increase in the value of an asset:
When an asset's value increases, it represents a gain for the firm.
Entry: Asset A/c Dr.
To Revaluation A/c
This matches with (III)
(B) For reduction in the amount of a liability:
When a liability decreases, it represents a gain for the firm (the firm owes less).
Entry: Liability A/c Dr.
To Revaluation A/c
This matches with (IV)
(C) For reduction in the value of an asset:
When an asset's value decreases, it represents a loss for the firm.
Entry: Revaluation A/c Dr.
To Asset A/c
This matches with (I)
(D) For appreciation in the amount of a liability:
When a liability increases (appreciation means increase here), it represents a loss for the firm (the firm owes more).
Entry: Revaluation A/c Dr.
To Liability A/c
This matches with (II)
Correct matching: (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
Answer: Option 4