Why do firm revaluate
assets and reassess their liabilities on retirement or on the event
of death of a partner?
Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?
At the time of
retirement or death of a partner, it becomes inevitable to revalue
the assets and liabilities of the firm for ascertaining their true
and fair values. The revaluation is necessary as the value of assets
and liabilities may increase or decrease with the passage of time.
Further, it may be possible that there are certain assets and
liabilities that remained unrecorded in the books of accounts. The
retiring or the deceased partner may be benefited or may bear loss
due to change in the values of assets and liabilities. Therefore, the
revaluation of the assets and liabilities is necessary in order to
ascertain the true profit or loss that is to be divided among all the
partners in their old profit sharing ratio.
At the time of retirement or death of a partner, it becomes inevitable to revalue the assets and liabilities of the firm for ascertaining their true and fair values. The revaluation is necessary as the value of assets and liabilities may increase or decrease with the passage of time. Further, it may be possible that there are certain assets and liabilities that remained unrecorded in the books of accounts. The retiring or the deceased partner may be benefited or may bear loss due to change in the values of assets and liabilities. Therefore, the revaluation of the assets and liabilities is necessary in order to ascertain the true profit or loss that is to be divided among all the partners in their old profit sharing ratio.
