Revaluation of partnership assets Chapter 43

Why revalue? The profit / losses sharing ratios that exist in a partnership need to be amended when: A new partner is admitted A partner leaves the partnership The partners want to change the profit / losses sharing ratios Revalue the assets Record the changes in the ledger accounts

What to do… if: new value of assets 90,000 is more than: old value of assets -60,000 the result is: gain on revaluation 30,000   40,000 is less than: -50,000 loss on revaluation -10,000

Open a revaluation account For each asset showing a gain: a. Debit the asset account with the gain b. Credit the revaluation account 2. For each asset showing a loss: a. Debit revaluation account b. Credit the asset account with loss 3. If there is an increase in total valuation of assets: Debit profit to revaluation account Credit old partner’s capital account in the old profit & loss sharing ratios 4. If there is a fall in the total valuation of assets: Debit old partner’s capital accounts in old profit & loss sharing ratios Credit loss to revaluation account

Questions 43.1 page 574