Q.L, M and N are partners sharing profits and losses in the ratio 2:2:1. On N's retirement, it was agreed to revalue assets and liabilities as follows: Building to be appreciated by ₹15,000; Furniture to be depreciated by ₹5,000; a provision for Outstanding Expenses of ₹3,000 is to be created; and Investments worth ₹7,000, not so far recorded in the books, are to be brought into account. Prepare the Revaluation Account.

Every item is classified as a gain (asset up, or a previously unrecorded asset) or a loss (asset down, or a new liability), and the balance is then shared by ALL three partners, N included, in the old ratio.

Each item is classified using the standard rules: an increase in an asset, or a previously unrecorded asset now brought in, is a GAIN (credit side); a decrease in an asset, or a new liability/provision, is a LOSS (debit side).

• Building appreciated by ₹15,000 → asset increase → gain, credit side.
• Furniture depreciated by ₹5,000 → asset decrease → loss, debit side.
• Provision for Outstanding Expenses of ₹3,000 created → a new liability → loss, debit side.
• Investments of ₹7,000, not so far recorded, now brought into the books → unrecorded asset → gain, credit side.

Revaluation Account

A common mistake on retirement questions specifically is leaving the retiring partner OUT of the revaluation profit/loss distribution, by wrongly copying the admission-chapter rule (where the new partner is excluded) — on retirement, t …