Why profit and loss adjustment account or revaluation aacount is prepared?

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Profit and loss account are prepared the net and ascertain profit and loss of any business firm and revaluation A/c are prepared for net effect on assets and liabilities of business firm........

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Plzzz guys describe this answer in detail

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See Sonali we prepare revaluation at the time of admission retirement death to know the profit occur due to change in value of assets and liabilities ok and we distribute the profit or loss in old ratio because the coming partner do not get loss or profit due to change in value because this has happened during old partners partnership this is case of admission similarly in case of retirement and death also if you understand this then you can also watch my YouTube video on some topics of 12th

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Profit and loss account is prepared to insure the net profit for a particular period

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Profit and loss adjustment is made just to give true and fair view of the profit and loss of a firm

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For estimating change in values of assets and liabilities

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To intrepret about the profit or loss incurred or to know about the financial conditiin of the firm

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Just for understand how much profit or loss

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For adjusting the current market value of assets and liabilities.

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Profit and loss A/c is being prepared for find out the net profit as result of operating activities of the business..whereas Revaluation A/c is being prepared to find out the net effect on assets and liabilities of the business

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Profit and loss accounts are prepared to ascertain the net profit and loss of the firm during an accounting period.               And revolution accounts are prepared for distribution of profit and loss amongs partner.

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To revaluate the assets and reassess the liabilities at the time of reconstitution of the firm.

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Just for show the changes in assets and liability...

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We prepare profit and loss appropriation account to ascertain the final figure of profit or loss of the firm which is to be distributed among the partner in profit sharing ratio. And the balancing figure of this account are distribute among partners in agreed ratio or equally. The items that are recorded in debit sides of profit and loss appropriation account are Interest on capital,Interest on loan, salary, commission, electric bill etc. And credit side items is firstly net profit shown and Interest on drawing or some times loss so that we prepare this profit and loss appropriation account. And now,second is to prepare the( Revolution account) first of all revolution a/c is nominal account it is also called profit and loss adjustment account when we prepare revolution account their must be a difference that difference is called profit and loss this profit and loss is transfered to the partners capital. If Debit side is excess over then credit side is called profit.

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For distribution of profit

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For this purpose a revaluation account is prepared....it is debited with decrease in the value of assets and increased in the value of liabilities . the balance of this account shows a gain or loss on revaluation which is transferred to the existing partners capital account in old profit sharing ratio.
REVALUATION means : the action of assessing the value of something again

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To ascertain profit or loss

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To maintain the asset and liability in the correct value....

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The profit and loss adjustment account is prepared because of the following two reasons.....In this situation, this account acts as a substitute for profit and loss appropriation account.
Revaluation account is a nominal account prepared for the purpose of distributing and transferring the profit and loss arising out of increase in the Book value of assets/liabilities of the partnership firm at the time of change in profit sharing ratio, admission of a partner, retirement of a partner...

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We prepare profit and loss a/c to know the possess of bussiness a revaluation a/c is prepared in order to ascertain net gain {(loss) on revaluation of assets and liabilities

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To know the change in our assets & liabilities.

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1) Profit & Loss A/C is prepared to find out Net Profit/Net Loss of the period.

2) Profit and loss Adjustment Account shows after ascertaining profits of an accounting year how it is to be divided among the partners.

3) Revaluation A/c is prepared whenever there is Reconstitution of Partnership (Admission, Retirement, death). Revaluation of assets and reassessment of liabilities (as per market value) is done in this account and profit nd loss on account of such is divided among old partners.

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Revaluation account - it is nominal account prepared for the purpose of distribution and transfer profit and loss

profit and loss appropriations - to record those transactions or omission and error which were left while preparing the final account

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Revaluation A/C is prepared at the time of reconstitution of partnership firm to know the change or to find the profit or loss from the revaluation of assets and liabilities.While profit and loss A/C is prepared to find out the profit or loss of a business.

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It is prepared to know the net loss or net profit of the firm at the end of the year

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Revolution account is an account prepared in connection with recording of increase or decrease in value of assets and liabilities and to find profit or loss on revolution.

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Introduction:

Profit and loss adjustment account or revaluation account is prepared to adjust the unrealized profit or loss in the financial statements. It is prepared to ensure that the financial statements accurately reflect the true financial position of the business.

Reasons for Preparation:

There are various reasons why profit and loss adjustment account or revaluation account is prepared. Some of the common reasons are:

1. Changes in the Value of Assets and Liabilities: The value of assets and liabilities may change over time due to various factors such as inflation, changes in market conditions, etc. This may lead to unrealized gains or losses which need to be adjusted in the financial statements.

2. Changes in Accounting Policies: The accounting policies of a business may change over time which may result in changes in the way assets and liabilities are valued. This may also lead to unrealized gains or losses which need to be adjusted in the financial statements.

3. Changes in Partnership: If there is a change in the partnership of a business, then the value of assets and liabilities may change due to the admission or retirement of partners. This may lead to unrealized gains or losses which need to be adjusted in the financial statements.

4. Errors in Financial Statements: Sometimes, errors may be made while preparing the financial statements which may result in the overvaluation or undervaluation of assets and liabilities. This may also lead to unrealized gains or losses which need to be adjusted in the financial statements.

Conclusion:

Profit and loss adjustment account or revaluation account is an important tool for adjusting the unrealized gains or losses in the financial statements. It ensures that the financial statements accurately reflect the true financial position of the business.

Similar Commerce Doubts

Name the Account which is prepared for finding the profit or loss on getting amount from selling of all assets and paying amount of liabilities.

Name the Account which is prepared for finding the profit or loss on getting amount from selling of all assets and paying amount of liabilities.

Sandeep Vamsi or partners shares profit in the ratio 5 :2:3 according to the partnership deed Vamsi is to get a minimum of 10000 rupees as he profit every year the profit for the year 2019 amount to 50000 rupees prepared profit and loss appropriation account?

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