Question

For adjustment of asset & liabilities which account should be prepared?

• A. Adjustment account
• B. Capital reduction account
• C. Revaluation Account
• D. Realization account

Answer 1

Answer: (C)

Revaluation Account

A revaluation account is opened for the purpose of adjustments of assets and liabilities. This account id debited with all the reduction in the value of assets and increase in liabilities and credited with increase in the value of assets and decrease in the value of liabilities. The difference in two sides of the account will show profit or loss. This is transferred to capital accounts of old partners in old profit sharing ratio.