Revaluation Account | Crash Course of Accountancy - Class 12 - Commerce PDF Download

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Revaluation A/C 
Revaluation a/c  
Meaning – the account which is prepared to revalue & records the assets and liabilities at their market value 
is called as revaluation account. 
Nature – it is nominal account so the rule of nominal account is followed due to which all losses are debited 
and all gains are credited. 
  loss - decrease in assets & increase in liabilities 
  gain-  increase in assets & decrease in liabilities 
another name of revlaution is P & L Adjustments a/c 
 
when prepared- Revaluation is account is prepared at the time of – 
1. Change in profit sharing ratio 
2. Admission of a partner 
3. Retirement of a partner  
4. Death of a partner  
 
Revaluation of assets and liabilities 
 
 
 
 
 
 
 
 
Transaction Entry 
1. for decrease in assets Revaluation a/c  
  To assets 
2. for increase in liabilities Revaluation a/c  
  To liabilities 
3. for increase in assets Assets a/c  
 To Revaluation a/c 
4. for decrease in liabilities Liabilities 
 To Revaluation a/c 
5. for profits  Revaluation a/c 
  To A 
  To B 
6. for losses A 
B  
  To revaluation a/c 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
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Revaluation A/C 
Revaluation a/c  
Meaning – the account which is prepared to revalue & records the assets and liabilities at their market value 
is called as revaluation account. 
Nature – it is nominal account so the rule of nominal account is followed due to which all losses are debited 
and all gains are credited. 
  loss - decrease in assets & increase in liabilities 
  gain-  increase in assets & decrease in liabilities 
another name of revlaution is P & L Adjustments a/c 
 
when prepared- Revaluation is account is prepared at the time of – 
1. Change in profit sharing ratio 
2. Admission of a partner 
3. Retirement of a partner  
4. Death of a partner  
 
Revaluation of assets and liabilities 
 
 
 
 
 
 
 
 
Transaction Entry 
1. for decrease in assets Revaluation a/c  
  To assets 
2. for increase in liabilities Revaluation a/c  
  To liabilities 
3. for increase in assets Assets a/c  
 To Revaluation a/c 
4. for decrease in liabilities Liabilities 
 To Revaluation a/c 
5. for profits  Revaluation a/c 
  To A 
  To B 
6. for losses A 
B  
  To revaluation a/c 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
          
 
When revised values are to be recorded AT THE TIME OF CHANGE IN PROFIT SHARING RATIO 
Step 1 find SR= OR- NR     revaluation a/c 
Step 2 prepare revaluation a/c 
Step 3 Divide the profits and losses of revaluation in O.R. 
PROFITS    [O.R] LOSSES    [O.R] 
REVALUATION A/C 
 To A’S capital a/c 
 To B’S capital a/c 
 To C’S capital a/c                            
 A’S capital a/c 
 B’S capital a/c 
 C’S capital a/c   
        TO Revaluation a/c  
Step 4. Distribute the reserves or goodwill in 
sacrificing ratio    CAPITAL A/C 
Particulars Dr. Cr. 
Gainers A/C 
  To Sacrificer A/C 
{in sacrificing ratio} 
  
 
Step 5. Prepare partners capital a/c 
Step 6. Prepare balance sheet 
Liabilities Rs. Assets Rs. 
 Capital  
Revised values 
 Revised  
Values 
 
 
 
A, B and C are partners sharing profits and losses in the ratio of 3:3:2. Their balance sheet as on 31st March 2003 was 
as follows: 
Liabilities Rs. Assets        Rs. 
Sundry Creditors 24,000 Cash at Bank 37,000 
General Reserve 36,000 Sundry Debtors 44,000 
Capital Accounts:  Stock 1,20,000 
                 A                          2,00,000   Machinery 1,59,000 
                 B                          1,50,000  Building 2,00,000 
                 C                          1,50,000 5,00,000   
 5,60,000  5,60,000 
    
Partners decided that with effect from 1st April 2003, they would share profits and losses in the ratio of 4:3:2. It was 
agreed that: 
(i) Stock to be valued at Rs.1,10,000. 
(ii) Machinery is to be depreciated by 10%. 
(iii) A provision for doubtful debts is to be made on debtors @ 5%. 
(iv) Building to be appreciated by 20%. 
(v) A liability for Rs.2,500 included in sundry creditors is not likely to arise. 
Partners agreed that the revised values are to be recorded in the books. They do not, however want to distribute t he 
general reserve. You are required to prepare journal entries, capital accounts of the partners and the revised balance 
sheet. 
 
  
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
Particulars A B C PARTICULARS A B C 
To reval 
To sacrificer 
To bal c/d 
   By balance b/d  
By revaluation 
By gainer a/c 
   
 
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Revaluation A/C 
Revaluation a/c  
Meaning – the account which is prepared to revalue & records the assets and liabilities at their market value 
is called as revaluation account. 
Nature – it is nominal account so the rule of nominal account is followed due to which all losses are debited 
and all gains are credited. 
  loss - decrease in assets & increase in liabilities 
  gain-  increase in assets & decrease in liabilities 
another name of revlaution is P & L Adjustments a/c 
 
when prepared- Revaluation is account is prepared at the time of – 
1. Change in profit sharing ratio 
2. Admission of a partner 
3. Retirement of a partner  
4. Death of a partner  
 
Revaluation of assets and liabilities 
 
 
 
 
 
 
 
 
Transaction Entry 
1. for decrease in assets Revaluation a/c  
  To assets 
2. for increase in liabilities Revaluation a/c  
  To liabilities 
3. for increase in assets Assets a/c  
 To Revaluation a/c 
4. for decrease in liabilities Liabilities 
 To Revaluation a/c 
5. for profits  Revaluation a/c 
  To A 
  To B 
6. for losses A 
B  
  To revaluation a/c 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
          
 
When revised values are to be recorded AT THE TIME OF CHANGE IN PROFIT SHARING RATIO 
Step 1 find SR= OR- NR     revaluation a/c 
Step 2 prepare revaluation a/c 
Step 3 Divide the profits and losses of revaluation in O.R. 
PROFITS    [O.R] LOSSES    [O.R] 
REVALUATION A/C 
 To A’S capital a/c 
 To B’S capital a/c 
 To C’S capital a/c                            
 A’S capital a/c 
 B’S capital a/c 
 C’S capital a/c   
        TO Revaluation a/c  
Step 4. Distribute the reserves or goodwill in 
sacrificing ratio    CAPITAL A/C 
Particulars Dr. Cr. 
Gainers A/C 
  To Sacrificer A/C 
{in sacrificing ratio} 
  
 
Step 5. Prepare partners capital a/c 
Step 6. Prepare balance sheet 
Liabilities Rs. Assets Rs. 
 Capital  
Revised values 
 Revised  
Values 
 
 
 
A, B and C are partners sharing profits and losses in the ratio of 3:3:2. Their balance sheet as on 31st March 2003 was 
as follows: 
Liabilities Rs. Assets        Rs. 
Sundry Creditors 24,000 Cash at Bank 37,000 
General Reserve 36,000 Sundry Debtors 44,000 
Capital Accounts:  Stock 1,20,000 
                 A                          2,00,000   Machinery 1,59,000 
                 B                          1,50,000  Building 2,00,000 
                 C                          1,50,000 5,00,000   
 5,60,000  5,60,000 
    
Partners decided that with effect from 1st April 2003, they would share profits and losses in the ratio of 4:3:2. It was 
agreed that: 
(i) Stock to be valued at Rs.1,10,000. 
(ii) Machinery is to be depreciated by 10%. 
(iii) A provision for doubtful debts is to be made on debtors @ 5%. 
(iv) Building to be appreciated by 20%. 
(v) A liability for Rs.2,500 included in sundry creditors is not likely to arise. 
Partners agreed that the revised values are to be recorded in the books. They do not, however want to distribute t he 
general reserve. You are required to prepare journal entries, capital accounts of the partners and the revised balance 
sheet. 
 
  
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
Particulars A B C PARTICULARS A B C 
To reval 
To sacrificer 
To bal c/d 
   By balance b/d  
By revaluation 
By gainer a/c 
   
 
          
 
When revised values are not to be recorded AT THE TIME OF CHANGE IN PROFIT SHARING RATIO 
Step 1 find SR= OR- NR      revaluation a/c 
Step 2 prepare revaluation a/c 
Step 3 Divide the profits and losses of revaluation and the reserves 
or goodwill in sacrificing ratio 
Find the net effect 
Reserves+ 
Goodwill + 
Revaluation profits + 
Revaluation losses – 
P & l balance ( cr. Balance ) + 
P & l balance ( Dr. Balance ) + 
Pass the journal entry  
 
Step 4  Prepare partners capital a/c 
 
 
 
 
 
Step 5 prepare balance sheet 
AT OLD VALUES [UN ALTERED VALUES]  
ONLY CAPITAL IS RECORDED AT REVISED VALUES OBTAINED FROM THE CAPITAL A/C 
 
 
 
 
 
 
 
X and Y are partners sharing profits and losses in the ratio of 4:3. Their Balance Sheet as on 31st December 2002 stood 
as follows: 
Liabilities Rs. Assets        Rs. 
Sundry Creditors 28,000 Cash  20,000 
Reserve 42,000 Sundry Debtors 1,20,000 
Capital Accounts:  Stock 1,40,000 
                 X                          2,40,000   Fixed Assets 1,50,000 
                 Y                          1,20,000 3,60,000   
 4,30,000  4,30,000 
    
     They decided that from 1st January 2003 they will share profits and losses in the ratio of 2:1. For this purpose they 
decided that: 
(i) Fixed Assets to be depreciated by 10%. 
(ii) A provision of 6% be made on debtors for doubtful debts.  
(iii) Stock to be valued at 1,90,000. 
(iv) An amount of 3,700 included in creditors is not likely to be claimed. 
    Partners decided neither to record the revised values in the books nor they want to disturb the reserves. You are 
required to prepare journal entries, capital account of the partners and the revised balance sheet. 
 
  
Particulars 
[losses] 
Rs. Particulars 
[gains] 
Rs. 
ASSETS  
LIABILITIES    
 ASSETS   
LIABILITIES 
 
Particulars Dr. Cr. 
Gainers A/C 
  To Sacrificer A/C 
{in sacrificing ratio} 
  
Particulars A B C PARTICULARS A B C 
To sacrificer 
To bal c/d 
   By balance b/d  
By gainer a/c 
   
LIABILITIES 
 
RS. ASSETS RS. 
 
CAPITAL