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On the admission of a new partner increase in the value of assets is debited to:
- a)Profit and Loss Adjustment Account
- b)Assets Account
- c)Old Partner’s Capital Account
- d)Revaluation Account
Correct answer is option 'B'. Can you explain this answer?
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On the admission of a new partner increase in the value of assets is d...
Increase in the value of assets is debited to Assets account.
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On the admission of a new partner increase in the value of assets is d...
Assets Account
Increasing the value of assets upon the admission of a new partner is a common occurrence in partnership accounting. When new partners join a partnership, the value of the assets of the business may increase due to various reasons such as revaluation of assets, injection of new capital, or contribution of assets by the new partner.
Debit Entry
- In accounting, any increase in the value of assets is recorded by making a debit entry. This means that the asset account is debited to reflect the increase in value.
- The debit entry increases the balance of the asset account, thereby recognizing the higher value of assets in the partnership's books.
Reason for Debiting to Assets Account
- When a new partner is admitted to the partnership and the value of assets increases, it is appropriate to debit the increase directly to the Assets Account.
- This maintains the accuracy of the balance sheet by reflecting the true value of assets held by the partnership.
- Debiting the increase in assets to the Assets Account ensures that the financial statements show the updated value of assets after the admission of the new partner.
In conclusion, the correct accounting treatment for the increase in the value of assets upon the admission of a new partner is to debit the Assets Account. This ensures that the financial statements accurately reflect the higher value of assets in the partnership and maintains the integrity of the balance sheet.
Increasing the value of assets upon the admission of a new partner is a common occurrence in partnership accounting. When new partners join a partnership, the value of the assets of the business may increase due to various reasons such as revaluation of assets, injection of new capital, or contribution of assets by the new partner.
Debit Entry
- In accounting, any increase in the value of assets is recorded by making a debit entry. This means that the asset account is debited to reflect the increase in value.
- The debit entry increases the balance of the asset account, thereby recognizing the higher value of assets in the partnership's books.
Reason for Debiting to Assets Account
- When a new partner is admitted to the partnership and the value of assets increases, it is appropriate to debit the increase directly to the Assets Account.
- This maintains the accuracy of the balance sheet by reflecting the true value of assets held by the partnership.
- Debiting the increase in assets to the Assets Account ensures that the financial statements show the updated value of assets after the admission of the new partner.
In conclusion, the correct accounting treatment for the increase in the value of assets upon the admission of a new partner is to debit the Assets Account. This ensures that the financial statements accurately reflect the higher value of assets in the partnership and maintains the integrity of the balance sheet.
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On the admission of a new partner increase in the value of assets is debited to:a)Profit and Loss Adjustment Accountb)Assets Accountc)Old Partner’s Capital Accountd)Revaluation AccountCorrect answer is option 'B'. Can you explain this answer?
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