Why is there need for
the revaluation of assets and liabilities on the admission of a
partner?
Why is there need for the revaluation of assets and liabilities on the admission of a partner?
At the time of
admission of a new partner, it becomes very necessary to revalue the
assets and liabilities of a partnership firm for ascertaining its
true and fair values. This is done because the value of assets and
liabilities may have increased or decreased and consequently their
corresponding figures in the old balance sheet may either be
understated or overstated. Moreover, it may also be possible that
some of the assets and liabilities are left unrecorded. Thus, in
order to record the increase and decrease in the market value of the
assets and liabilities, Revaluation Account is prepared and any
profits or losses associated with this increase or decrease are
distributed among the old partners of the firm.
At the time of admission of a new partner, it becomes very necessary to revalue the assets and liabilities of a partnership firm for ascertaining its true and fair values. This is done because the value of assets and liabilities may have increased or decreased and consequently their corresponding figures in the old balance sheet may either be understated or overstated. Moreover, it may also be possible that some of the assets and liabilities are left unrecorded. Thus, in order to record the increase and decrease in the market value of the assets and liabilities, Revaluation Account is prepared and any profits or losses associated with this increase or decrease are distributed among the old partners of the firm.
