Q.What is meant by Revaluation of assets and liabilities ?

Revaluation = restating assets and liabilities at current/fair values at the time of reconstitution of a firm, with the profit or loss going to the old partners in the old ratio.

In the Tamil Nadu HSC Commerce (Samacheer Kalvi) Class-12 Accountancy syllabus, whenever a partnership firm is reconstituted — on admission, retirement or death of a partner — the assets and liabilities may no longer be shown at their true worth.

Meaning: Revaluation of assets and liabilities is the act of reassessing the values recorded in the books and adjusting them to their present (fair) values. For example, an asset may have appreciated or depreciated, or a liability may be more or less than the recorded amount.

Why it is done: Any gain or loss arising from these changes relates to the period before the reconstitution. It must therefore be credited or debited only to the OLD partners, in their OLD profit-sharing ratio, so that the incoming/outgoing partner is not unfairly affected.

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