Question

Which of the following would affect the Revaluation Account at the time of admission of a partner?
(A) Increase in assets
(B) Drawings against capital
(C) Recording of unrecorded assets
(D) Decrease in liabilities

• A. (A), (C), and (D) only
• B. (A), (B), and (D) only
• C. (A), (B), and (C) only
• D. (B), (C), and (D) only

Answer 1

The Correct Option is C

When a new partner is admitted into a firm, it often requires the revaluation of assets and liabilities to ensure that the balance sheet reflects current values. The Revaluation Account is used for this purpose. Let's analyze which options impact the Revaluation Account: 

(A) Increase in assets: When assets increase, a gain is recognized in the Revaluation Account, as the actual economic value of the assets is higher than what is recorded.

(B) Drawings against capital: This transaction is personal in nature and affects the Capital Account, not the Revaluation Account. Thus, it does not play a role in revaluation.

(C) Recording of unrecorded assets: When previously unrecorded assets are entered, it reflects an increase in assets. This requires recording in the Revaluation Account as a gain.

(D) Decrease in liabilities: A decrease in liabilities means lesser amounts are owed, reflecting positively. This too affects the Revaluation Account as a gain.

Option	Affected
(A) Increase in assets	Yes
(B) Drawings against capital	No
(C) Recording of unrecorded assets	Yes
(D) Decrease in liabilities	Yes

Based on this analysis, the options that affect the Revaluation Account are thus: (A), (C), and (D).

Answer 2

When a new partner is admitted in a partnership, the existing partnership needs to revalue its assets and liabilities to reflect their current value. The Revaluation Account is used for this purpose. Let's analyze the options that affect the Revaluation Account:

• (A) Increase in assets: If the value of existing assets increases, it would result in a credit to the Revaluation Account, indicating a gain.
• (B) Drawings against capital: This will not affect the Revaluation Account, as it pertains to withdrawals affecting the capital account rather than the revaluation of assets or liabilities.
• (C) Recording of unrecorded assets: This involves recording assets that were previously not recognized in the books, leading to a credit in the Revaluation Account, indicating an increase in value.
• (D) Decrease in liabilities: If liabilities decrease, this would result in a credit to the Revaluation Account, as it improves the financial position of the partnership.

Based on the analysis, the correct options affecting the Revaluation Account are (A) Increase in assets, (C) Recording of unrecorded assets, and (D) Decrease in liabilities.

Therefore, the closest correct answer given the options provided is: (A), (C), and (D) only