Question

On the admission of a new partner, the increase in the value of an asset is credited to __________.

• A. P & L adjustment a/c
• B. Asset a/c
• C. Old partner's capital a/c
• D. none of the above

Answer 1

The correct option is A P & L adjustment a/c

When a new partner is admitted into the partnership, assets are revalued and liabilities are reassessed. A revaluation account or profit and loss adjustment account is opened for the purpose. This account is debited with all reduction in the value of assets and increase in the value of liabilities and credited with increase in the value of assets and decrease in the value of liabilities. The difference in two sides of account will show profit or loss which is transferred to capital accounts of old partners in old profit sharing ratio.