On the admission of a new partner, a credit balance in the Revaluation Account is transferred to the old partners in which ratio?
Correct answer: B. Old profit-sharing ratio
- A. New profit-sharing ratio
- B. Old profit-sharing ratio
- C. Sacrificing ratio of new partner
- D. Capital ratio after admission
Explanation
A revaluation profit arises from changes in the value of assets and liabilities before the new partner joins. It belongs to the old partners and is transferred to them in their old profit-sharing ratio. The new partner does not share this past profit.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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