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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 'B'. Can you explain this answer?
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The balance of memorandum revaluation account (second part), is transf...
First part is prepared to record the increase or decrease in the value of assets and liabilities and the second part is prepared to nullify the changes in the first part. The balance of revaluation account(profit or loss) is transferred to Old Partners Capital Accounts in their old profit-sharing ratio.
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The balance of memorandum revaluation account (second part), is transf...
Explanation:
The memorandum revaluation account is an account that is created to record the revaluation of assets and liabilities of a partnership firm. It is a nominal account and has a credit balance. The balance of the memorandum revaluation account shows the profit or loss arising from the revaluation of assets and liabilities.
When the revaluation of assets and liabilities is done, the profit or loss arising from it is transferred to the memorandum revaluation account. The balance of this account is then transferred to the capital accounts of the partners in their old profit sharing ratio.
The reason for transferring the balance of the memorandum revaluation account to the capital accounts of the partners in their old profit sharing ratio is that the revaluation of assets and liabilities affects the capital of the partners. The partners' capital accounts need to be adjusted to reflect the changes in the value of the assets and liabilities of the firm.
Transferring the balance to the capital accounts of the partners in their old profit sharing ratio ensures that the partners' capital accounts are adjusted according to their existing profit sharing ratio. This means that the partners' capital accounts will reflect the changes in the value of the assets and liabilities of the firm, while maintaining their existing profit sharing ratio.
Conclusion:
To summarize, the balance of the memorandum revaluation account is transferred to the capital accounts of the partners in their old profit sharing ratio. This ensures that the partners' capital accounts are adjusted to reflect the changes in the value of the assets and liabilities of the firm, while maintaining their existing profit sharing ratio.
The memorandum revaluation account is an account that is created to record the revaluation of assets and liabilities of a partnership firm. It is a nominal account and has a credit balance. The balance of the memorandum revaluation account shows the profit or loss arising from the revaluation of assets and liabilities.
When the revaluation of assets and liabilities is done, the profit or loss arising from it is transferred to the memorandum revaluation account. The balance of this account is then transferred to the capital accounts of the partners in their old profit sharing ratio.
The reason for transferring the balance of the memorandum revaluation account to the capital accounts of the partners in their old profit sharing ratio is that the revaluation of assets and liabilities affects the capital of the partners. The partners' capital accounts need to be adjusted to reflect the changes in the value of the assets and liabilities of the firm.
Transferring the balance to the capital accounts of the partners in their old profit sharing ratio ensures that the partners' capital accounts are adjusted according to their existing profit sharing ratio. This means that the partners' capital accounts will reflect the changes in the value of the assets and liabilities of the firm, while maintaining their existing profit sharing ratio.
Conclusion:
To summarize, the balance of the memorandum revaluation account is transferred to the capital accounts of the partners in their old profit sharing ratio. This ensures that the partners' capital accounts are adjusted to reflect the changes in the value of the assets and liabilities of the firm, while maintaining their existing profit sharing ratio.
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The balance of memorandum revaluation account (second part), is transferred to the capital accounts of the partners in :a)Capital Ratiob)Old profit sharing Ratioc)New profit sharing Ratiod)Sacrificing RatioCorrect answer is option 'B'. Can you explain this answer?
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