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Profit or loss on revaluation is shared among the partners in ……… ratio.
- a)Old Profit Sharing.
- b)New Profit Sharing.
- c)Capital.
- d)Equal
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Profit or loss on revaluation is shared among the partners in ratio.a...
Answer:
The correct answer is Old Profit Sharing.
Explanation:
When a partnership firm revalues its assets and liabilities, it may result in a profit or loss on revaluation. This profit or loss on revaluation is shared among the partners in the Old Profit Sharing ratio. Let's break down the explanation into bullet points:
- Revaluation of assets and liabilities is done to bring their values closer to their current market values.
- The revaluation process may lead to an increase or decrease in the value of assets and liabilities.
- If the revaluation results in a profit (i.e., the value of assets increases or the value of liabilities decreases), this profit is shared among the partners.
- The sharing of profit on revaluation is done based on the Old Profit Sharing ratio.
- The Old Profit Sharing ratio is the ratio in which the partners were sharing the profits before the revaluation.
- On the other hand, if the revaluation results in a loss (i.e., the value of assets decreases or the value of liabilities increases), this loss is also shared among the partners in the Old Profit Sharing ratio.
- The Old Profit Sharing ratio is important because it reflects the partnership agreement and the understanding between the partners regarding the sharing of profits and losses.
In conclusion, the profit or loss on revaluation is shared among the partners in the Old Profit Sharing ratio.
View all questions of this test
The correct answer is Old Profit Sharing.
Explanation:
When a partnership firm revalues its assets and liabilities, it may result in a profit or loss on revaluation. This profit or loss on revaluation is shared among the partners in the Old Profit Sharing ratio. Let's break down the explanation into bullet points:
- Revaluation of assets and liabilities is done to bring their values closer to their current market values.
- The revaluation process may lead to an increase or decrease in the value of assets and liabilities.
- If the revaluation results in a profit (i.e., the value of assets increases or the value of liabilities decreases), this profit is shared among the partners.
- The sharing of profit on revaluation is done based on the Old Profit Sharing ratio.
- The Old Profit Sharing ratio is the ratio in which the partners were sharing the profits before the revaluation.
- On the other hand, if the revaluation results in a loss (i.e., the value of assets decreases or the value of liabilities increases), this loss is also shared among the partners in the Old Profit Sharing ratio.
- The Old Profit Sharing ratio is important because it reflects the partnership agreement and the understanding between the partners regarding the sharing of profits and losses.
In conclusion, the profit or loss on revaluation is shared among the partners in the Old Profit Sharing ratio.
Most Upvoted Answer
Profit or loss on revaluation is shared among the partners in ratio.a...
Old Profit Sharing:
In the traditional method of profit sharing among partners, the profit or loss on revaluation is shared among the partners in their old profit sharing ratio. This means that the partners will divide the revaluation profit or loss based on their existing profit-sharing percentages.
Explanation:
When a partnership undergoes a revaluation of assets and liabilities, any resulting profit or loss needs to be allocated among the partners. The old profit sharing ratio is used for this purpose, as it reflects the agreed-upon distribution of profits before the revaluation took place.
Example:
For example, if Partner A has a 40% profit share, Partner B has a 30% profit share, and Partner C has a 30% profit share, any revaluation profit or loss will be distributed among them in this same ratio.
Importance:
Using the old profit sharing ratio ensures that partners receive their fair share of the revaluation profit or loss based on their contribution to the partnership's previous profits. This method maintains transparency and fairness in the distribution of revaluation gains or losses.
Conclusion:
In conclusion, when it comes to sharing the profit or loss on revaluation among partners, the old profit sharing ratio is the standard method used in partnerships. This approach ensures that partners receive their appropriate share of revaluation gains or losses based on their agreed-upon profit sharing percentages.
In the traditional method of profit sharing among partners, the profit or loss on revaluation is shared among the partners in their old profit sharing ratio. This means that the partners will divide the revaluation profit or loss based on their existing profit-sharing percentages.
Explanation:
When a partnership undergoes a revaluation of assets and liabilities, any resulting profit or loss needs to be allocated among the partners. The old profit sharing ratio is used for this purpose, as it reflects the agreed-upon distribution of profits before the revaluation took place.
Example:
For example, if Partner A has a 40% profit share, Partner B has a 30% profit share, and Partner C has a 30% profit share, any revaluation profit or loss will be distributed among them in this same ratio.
Importance:
Using the old profit sharing ratio ensures that partners receive their fair share of the revaluation profit or loss based on their contribution to the partnership's previous profits. This method maintains transparency and fairness in the distribution of revaluation gains or losses.
Conclusion:
In conclusion, when it comes to sharing the profit or loss on revaluation among partners, the old profit sharing ratio is the standard method used in partnerships. This approach ensures that partners receive their appropriate share of revaluation gains or losses based on their agreed-upon profit sharing percentages.
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