Partnership

Admission

Medium

common

Which is the correct statement, in respect of the Revaluation Account :-

It is a nominal account, and it is credited for the decrease in value of an asset.

It is a real account, and it is debited for the decrease in value of an asset.

It is a real account, and it is credited for the decrease in value of a liability.

It is a nominal account, and it is debited for the decrease in value of an asset.

✅ Correct Option: 4

Revaluation Account is a nominal account prepared during reconstitution of a partnership to record changes in the values of assets and liabilities.

Nature of Account:

Revaluation Account is similar to Profit and Loss Account - it records gains (profits) and losses arising from revaluation. Being a nominal account, it follows the rule: Debit all expenses and losses, Credit all incomes and gains.

Treatment of Decrease in Asset Value:

When an asset's value decreases, it represents a loss to the firm.

Following the nominal account rule:

Loss → Debit Revaluation Account

Credit → Asset Account (to reduce its book value)

For example, if Machinery decreases from ₹1,00,000 to ₹80,000:

Revaluation A/c Dr. 20,000

To Machinery A/c 20,000

Analysis of Options:

Options 2 and 3 incorrectly classify it as a real account
Option 1 states it should be credited for decrease in asset value, which is wrong (losses are debited)
Option 4 correctly identifies it as a nominal account that is debited for decrease in asset value (loss)

The correct answer is Option 4.

2025: 22 May Shift 2

L and M are partners sharing profits in the ratio 3:2. N is admitted as a partner for 1/5th of the share which is acquired from L. Goodwill of the firm is valued at Rs. 40,000 on N's admission. N will have to pay for Goodwill:

2026: 29 May Shift 2

A, B and T are partners in a firm sharing profits in the ratio of 3:2:1. Z is admitted into the firm for 1/4 share in profits, which he gets as, 1/8 from A and 1/8 from B. The total capital of the firm is agreed upon as Rs. 1,20,000 and Z is to bring in cash equivalent to 1/4 of this amount as his capital. The capitals of other partners are also to be adjusted in the ratio of their respective shares in profits. The capitals of A, B and T after all adjustments, are Rs. 40,000, Rs. 35,000 and Rs. 30,000 respectively. Calculate the cash brought in or paid to each partner.

2026: 19 May Shift 1

A and B are partners. The net assets of the firm, including fictitious assets of Rs. 5,000, are Rs. 105,000. The total external liabilities of the firm are Rs. 20,000. The normal rate of return is 10% and the average profit of the firm is Rs. 12,000. The value of goodwill as per capitalization of super profit method will be :

2025: 14 May Shift 1

Which Factor does not Affect the Value of Goodwill:

2025: 4 June Shift 2

Which of the following factors affects the value of goodwill?

(A). Location of Business

(B). Partner's Performance

(C). Nature of Business

(D). Market Situation

Choose the correct answer from the options given below:

2026: 20 May Shift 1

If nothing is specified as to how does the new partner acquire his share from the old partners; it may be assumed that he gets it from them:

Which is the correct statement, in respect of the Revaluation Account :-

Solution

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