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Assets are revalued and liabilities of a firm are reassessed at the time of admission of a partner because the new partner should neither benefit nor suffer because of the changes in the value of assets and liabilities as on…
Revaluation Account is prepared: (i) To determine the Gain (profit)/Loss arising on account of Revaluation of Assets and Reassessment of Liabilities. (ii) To record the effect of Revaluation of Assets and Reassessment of Liabilities so as to show Assets and…
When Revaluation Account is prepared, the Assets and Liabilities are shown at their revised (revalued) values in the Balance Sheet of new firm.
Revaluation Account is a Nominal Account. It is credited with an increase in the value of assets and a decrease in the amount of liabilities (it is a gain) and debited with any decrease in the value of assets and…
‘Revaluation’ means ‘Revaluation of Assets and Reassessment of Liabilities’ at the time of reconstitution of the Partnership.
There is a need to revalue assets and reassess liabilities in the following circumstances: (i) When there is change in the profit sharing ratio (ii) On admission of a new partner (iii) On retirement or death of a partner
Anurag’s Sacrifice = 3/10 × 1/2 = 3/20; Bhawana’s Sacrifice = 3/10 × 1/2 = 3/20; Anurag’s Old Profit Share = 4/10 + 3/20 = 11/20; Bhawana’s Old Profit Share = 3/10 = 3/20 = 9/20 Anurag and Bhawana’s old…
The share of future profits which the incoming partner will receive is due to the sacrifice of profit by an existing partner or partners of the firm. The compensation he pays against this sacrifice is called Goodwill or Premium
(i) For distributing goodwill brought in by the new partner. (ii) For adjusting goodwill in case of change in the profit sharing ratio of the existing partners.
The ratio in which the shares of the old partners are reduced is known as Sacrificing Ratio. It is important to determine the sacrificing ratio because the new partner will compensate the sacrificing partners in their sacrificing ratio by paying…