CUET Accountancy 2024
Accountancy
Accounting for Partnership
Easy
Which of the following would affect the Revaluation Account at the time of reconstitution of a partnership firm?
Which of the following would affect the Revaluation Account at the time of reconstitution of a partnership firm?
Correct Option: 1
In a partnership firm, a Revaluation Account is prepared during reconstitution to reflect changes in asset values and ensure fair treatment of partners' capital accounts.Increase in assets: This directly affects the Revaluation Account. When assets are revalued upwards, the increase is recorded, impacting the partners' capital accounts based on their profit-sharing ratio.Drawings against capital: This refers to withdrawals made by partners from their capital. While it affects individual capital accounts, it does not impact the Revaluation Account.Interest on capital: This is a return given to partners on their invested capital. It is usually treated as an expense and does not influence the Revaluation Account.Partner's salary: Similar to interest on capital, this is a distribution of profits and does not affect the Revaluation Account.Thus, only an increase in assets is relevant for the Revaluation Account during reconstitution.
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CUET Accountancy 2024
CUET Accountancy 2024