Accountancy · Ch 6 — Retirement and Death of a Partner
Revaluation of Assets and Liabilities
Revaluation of Assets and Liabilities
Assets and liabilities are revalued at the time a partner retires or dies so that the outgoing partner receives (or bears) a fair share of any gain or loss in their values that has arisen while he or she was still a partner — the remaining partners then carry the revised values forward. This uses the same Revaluation Account technique already studied under Admission of a Partner.
Revaluation Account
A nominal account prepared to record the increase or decrease in the book values of assets and liabilities (and any unrecorded assets/liabilities) at the time a firm is reconstituted; its balance (profit or loss on revaluation) is transferred to the partners' Capital Accounts.
| Debit side (losses) | Credit side (gains) |
|---|---|
| Decrease in the value of an asset | Increase in the value of an asset |
| Increase in the value of a liability | Decrease in the value of a liability |
| An unrecorded liability now brought into the books | An unrecorded asset now brought into the books |
| A newly created/increased provision (e.g. for doubtful debts) | A provision no longer required, written back |
The balancing figure — profit or loss on revaluation — is transferred to all the partners' Capital Accounts, including the outgoing partner, in their old profit-sharing ratio, because the gain or loss relates to the period during which the old ratio was in force. …
A nominal account prepared on reconstitution of a firm to record increases/decreases in asset and liability values; its balance is shared among all …
A two-part revaluation account prepared when the partners want the book values of assets and liabilities to remain unchanged; the profit/loss is shared first among all partners in the old ratio and then reversed and shared among …