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CCP402
CCP402
CCP402.43 1
PARTNERSHIP ACCOUNTS
ADMISSION OF PARTNER
Objective
On completion of this period, you would
be able to understand:
what is revaluation of assets and
liabilities
what is revaluation account or profit
and loss adjustment account
CCP402.43 2
Recap
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Revaluation of assets and liabilities
Before admission of a new partner, it is customary to
revalue the assets and liabilities
By the passage of time, the value of assets and liabilities
may change
There may be a depreciation(decrease) or
appreciation(increase) in the value of asset
It becomes necessary to bring the value of assets and
liabilities to their true values
CCP402.43 4
Revaluation of assets and liabilities
CCP402.43 5
Revaluation of assets and liabilities
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Revaluation account
All changes in the value of assets and liabilities are
made in this account
It is also known as “Profit And Loss Adjustment A/C”
Revaluation account is to be debited when
the value of asset decreases
the liability amount increases
CCP402.43 7
Revaluation account
Revaluation account is to be credited when
The value of asset increases
The liability amount decreases
The balance in this account after the above adjustments
indicates the loss or gain
This loss or gain is to be transferred to the old partners’
capital accounts in their profit sharing ratio
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Journal entries
1. When the value of asset decreases:
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Journal entries
2. When the amount of liability increases
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Journal entries
3. When the value of asset increases
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Journal entries
4. When the liability decreases
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Journal entries
5. For distribution of loss on Revaluation a/c
to partners
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Journal entries
6. For distribution of gain on revaluation to
partners’ capital accounts:
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Summary
Revaluation of assets and liabilities
CCP402.43 15
Summary
The profit or loss should be shared only by the existing
partners
For this purpose, an account called, ‘Revaluation
account’ is to be opened
Revaluation account is to be debited when
the value of asset decreases
the liability amount increases
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Summary
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Review questions
1. What is ‘Revaluation’?
2. What is the necessity of Revaluation?
3. What is Revaluation Account?
4. What is the journal entry for the increase in the value of
an asset?
5. What is the journal entry for the transfer of profit on
revaluation?
CCP402.43 18
Quiz
1. The revaluation a/c is debited when
a) Increase in liability
b) Decrease in asset
c) Both a and b
d) None of the above
CCP402.43 19
2. The P & L adjustment a/c is credited when
a) Decrease in liability
b) Increase in asset
c) Both a & b
d) None of the above
CCP402.43 20