Q.A, B and C share profits in the ratio 3:2:1. On B's retirement, the following revaluations are agreed: Machinery is appreciated by Rs 9,000; Building is appreciated by Rs 14,000; Stock is reduced by Rs 3,000; and the Provision for Doubtful Debts is increased by Rs 2,000. Prepare the Revaluation Account and show how the resulting profit or loss is shared among the partners.

On a partner's retirement, assets and liabilities are revalued to their true worth on that date, and any resulting profit or loss belongs to ALL the partners (including the one retiring) in the OLD ratio, since it relates to the period before the reconstitution. …

Step 1 — List the increases and decreases.

Step 2 — Revaluation Account.

Step 3 — Compute the net profit. Total gains = 9,000 + 14,000 = 23,000. Total losses = 3,000 + 2,000 = 5,000. Net revaluation profit = 23,000 − 5,000 = Rs 18,000.

Step 4 — Share among ALL partners in the OLD ratio 3:2:1 (6 parts).

| Partner | Share | Amount |

|---|---|---| …

A very common mistake is sharing the revaluation profit or loss in the NEW ratio, or only among the continuing partners — it must always be shared among ALL partners, including the one retiring or the deceased part …