When a new partner is admitted, the increase in the value of the assets is debited to which account?

When a new partner is admitted, assets and liabilities are revalued to reflect their current market values. This ensures that the incoming partner pays for the true worth of the firm.

When an asset's value increases (appreciation), the journal entry recorded is:

Asset Account Dr.

To Revaluation Account (or Profit and Loss Adjustment Account)

The Asset Account is debited to increase its book value to the current market value. For example, if Machinery originally recorded at ₹50,000 is now valued at ₹60,000, the Machinery Account is debited by ₹10,000.

The corresponding credit goes to the Revaluation Account (also called Profit and Loss Adjustment Account), which accumulates all gains and losses from revaluation. The balance of this account is then distributed among the old partners in their old profit-sharing ratio.

Option 2 (Profit and Loss Adjustment account) is credited, not debited, when asset value increases.

Option 3 (Old partner's capital account) receives the credit of profit from revaluation indirectly, after the Revaluation Account is closed.

Option 4 (Profit and Loss account) is not used for revaluation adjustments at the time of admission.

Therefore, the increase in asset value is debited to the Assets account.