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The balance of memorandum revaluation account (second part), is transferred to the capital accounts of the partners in:
- a)Capital Ratio
- b)Old profit sharing Ratio
- c)New profit sharing Ratio
- d)Sacrificing Ratio
Correct answer is option 'C'. Can you explain this answer?
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The balance of memorandum revaluation account (second part), is transf...
Explanation:
Memorandum revaluation account is created to record the revaluation of assets and liabilities when there is a change in the profit sharing ratio or admission or retirement of partners. The balance of memorandum revaluation account (second part) represents the profit or loss on revaluation of assets and liabilities.
When the balance of memorandum revaluation account (second part) is transferred to the capital accounts of the partners, it is done on the basis of the new profit sharing ratio. This is because the new profit sharing ratio represents the new distribution of profits and losses among partners.
Therefore, the correct option is C, i.e., the balance of memorandum revaluation account (second part) is transferred to the capital accounts of the partners in the new profit sharing ratio.
In simple words, the profit or loss on revaluation of assets and liabilities is distributed among partners based on their new profit sharing ratio. This is done by transferring the balance of memorandum revaluation account (second part) to the capital accounts of the partners in the new profit sharing ratio.
Memorandum revaluation account is created to record the revaluation of assets and liabilities when there is a change in the profit sharing ratio or admission or retirement of partners. The balance of memorandum revaluation account (second part) represents the profit or loss on revaluation of assets and liabilities.
When the balance of memorandum revaluation account (second part) is transferred to the capital accounts of the partners, it is done on the basis of the new profit sharing ratio. This is because the new profit sharing ratio represents the new distribution of profits and losses among partners.
Therefore, the correct option is C, i.e., the balance of memorandum revaluation account (second part) is transferred to the capital accounts of the partners in the new profit sharing ratio.
In simple words, the profit or loss on revaluation of assets and liabilities is distributed among partners based on their new profit sharing ratio. This is done by transferring the balance of memorandum revaluation account (second part) to the capital accounts of the partners in the new profit sharing ratio.
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The balance of memorandum revaluation account (second part), is transf...
- The balance of a memorandum revaluation account is adjusted to reflect changes in asset values when a new partner joins or the partnership terms change.
- This balance is transferred to partners' capital accounts in the new profit-sharing ratio because it aligns with the future distribution of profits and losses.
- Using the new ratio ensures fair allocation reflecting the revised partnership agreement, maintaining equity among partners.
- This adjustment is crucial for aligning capital balances with future profit-sharing expectations.
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