Q.G and H are partners sharing profits in the ratio of 2:1. On admission of a new partner, the following revaluations are agreed: Building (book value ₹1,00,000) is to be appreciated by 20%; Stock (book value ₹40,000) is to be reduced by ₹5,000; Provision for Doubtful Debts is to be increased from ₹2,000 to ₹3,000; and Creditors of ₹4,000 are no longer likely to be claimed and are to be written off. Prepare the Revaluation Account.

On admission, assets and liabilities are revalued to their current worth so that any profit or loss on this revaluation — and any accumulated reserve or undistributed profit/loss already sitting in the old balance sheet — belongs entirely to the OLD partners, in their OLD profit-sharing ratio, since it arose before the new partner joined. A Revaluation Account is opened: it is debited with any decrease in an asset, increase in a liability, or a newly-recorded unrecorded liability; it is credited with any increase in an asset, decrease in a liability, or a newly-recorded unrecorded asset. The resulting profit or loss is transferred to the old partners' capital accounts in the old ratio. Reserves and accumulated profits (General Reserve, Reserve …