Skip to content

CMA Intermediate · Financial Accounting · Retirement of Partner

A firm of partners Gupta, Hegde and Iyer retires Iyer. Before settling the retiring partner's account, a revaluation shows that a building rose in value and an unrecorded liability was discovered. Which statement about the Revaluation Account is correct?

Increase in an asset is credited to the Revaluation Account as a gain, while an increase in a liability, or an unrecorded liability, is debited as a loss. The net balance is shared by all old partners in the old ratio.

  1. AIncrease in an asset is credited and increase in a liability is debited to the Revaluation AccountCorrect
  2. BIncrease in an asset is debited and increase in a liability is credited to the Revaluation Account
  3. CBoth an increase in asset and an increase in liability are credited
  4. DBoth an increase in asset and an increase in liability are debited

Explanation

The Revaluation Account records gains on the credit side and losses on the debit side. An increase in an asset is a gain (credit). An increase in a liability is a loss (debit). The other options reverse one or both signs.

Did you get it right without looking?

One question tells you little. A timed set on Retirement of Partner shows your real accuracy, how long you take and where you lose marks.

Practise Retirement of PartnerFree diagnostic mock

More Retirement of Partner questions