Revaluation of Assets and Liabilities

Just as on the admission of a new partner, assets and liabilities are revalued to their true current worth at the time a partner retires or dies — so that the outgoing partner receives (or bears) their fair share of any appreciation or shortfall that has built up while they were still a partner, and so that the continuing partners carry forward assets and liabilities at correct values.

A Revaluation Account is prepared:

• Increases in asset values and decreases in liabilities are credited to the Revaluation Account (they represent gains).
• Decreases in asset values, increases in liabilities, and newly discovered liabilities or unrecorded expenses are debited to the Revaluation Account (they represent losses). …