When an existing asset is increased in value during the admission of a partner, which account is credited for the increase?
Correct answer: A. Revaluation Account
- A. Revaluation Account
- B. New Partner’s Capital Account
- C. Old Partners’ Capital Accounts
- D. Cash Account
Explanation
An increase in an asset is recorded by debiting the asset account and crediting the Revaluation Account. The resulting revaluation profit is later transferred to the old partners in their old profit-sharing ratio.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
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.
Practise Partnership Accounts
34 free Partnership Accounts MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Partnership Accounts questions
When a partner withdraws cash for personal use from a firm with fluctuating capital accounts, which account is normally debited?
A, B and C have capital balances of Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively. C becomes insolvent and leaves a deficiency of Rs. 30,000. Under the Garner v. Murray principle, how much of this deficiency is borne by A?
A, B and C share profits in the ratio of 3:2:1. C dies four months after the beginning of the year. The previous year's profit was Rs. 180,000, and profit is assumed to accrue evenly. What amount is credited to C's account for the period before death?
If a partnership agreement is silent about interest on drawings, what treatment generally applies under the Partnership Act?
A new partner brings Rs. 80,000 in cash as capital on admission. Which journal entry records this contribution?
A memorandum revaluation account is used when partners do not want to change the book values of assets and liabilities. In the second part of this account, any reversal profit or loss is transferred among which partners?