Skip to content

CA Foundation · Accounting · Partnership and LLP Accounts

At the time of admission of a new partner, the firm's assets are revalued: stock of ₹80,000 is found to be worth ₹70,000, and a creditor of ₹15,000 is found to be no longer payable. Which is the correct net result in the Revaluation Account?

The Revaluation Account shows a profit of ₹5,000. The stock reduction is a ₹10,000 loss, but the creditor no longer payable is a ₹15,000 gain, so the net effect is a profit that goes to the old partners.

  1. AProfit of ₹5,000Correct
  2. BLoss of ₹10,000
  3. CLoss of ₹25,000
  4. DProfit of ₹25,000

Explanation

The fall in stock value is a loss of ₹10,000. A creditor no longer payable is a gain (liability decreased) of ₹15,000. Net = 15,000 - 10,000 = profit of ₹5,000, shared by the old partners in their old ratio. Treating both items as losses gives ₹25,000, which is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Partnership and LLP Accounts shows your real accuracy, how long you take and where you lose marks.

Practise Partnership and LLP AccountsFree diagnostic mock

More Partnership and LLP Accounts questions