Question

Profit or loss on revaluation is shared among the partners in __________ ratio.

• A. old profit sharing
• B. new profit sharing
• C. capital at the year end
• D. equal

Answer 1

The correct option is A old profit sharing

When a new partner is admitted into partnership or an old partner is retired from partnership or died, assets are revalued and liabilities are reassessed. A revaluation 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 between the two sides of the account will show profit or loss which is transferred to old partners capital account in their old profit sharing ratio.