Compulsory Revaluation at the Time of Admission of a New Partner

When a new partner is admitted into a partnership firm, it is necessary to revalue certain assets and liabilities to determine the new partner's capital contribution and ensure a fair distribution of profits and losses. Among the options given, the correct answer is option 'D' - Goodwill.

Explanation:

Revaluation of assets and liabilities is done to reflect their current market value rather than their original cost. This helps in determining the true financial position of the partnership firm and ensures that the new partner's capital contribution is based on the fair value of the assets and liabilities.

Reasons for Revaluation:

1. Goodwill: Goodwill represents the reputation, customer base, brand value, and other intangible assets of the partnership firm. It is an important asset that contributes to the firm's profitability. When a new partner is admitted, the existing goodwill needs to be revalued to determine its fair value. The new partner may bring in additional goodwill, and the existing partners may need to adjust their capital accounts based on the revalued goodwill.

2. Stock: Stock represents the inventory of goods held by the partnership firm for sale. It is not compulsory to revalue stock at the time of admission of a new partner. However, if there is a significant change in the market value of the stock, it may be revalued to reflect the current value accurately.

3. Fixed Assets: Fixed assets include land, buildings, machinery, furniture, etc., used in the business. It is not compulsory to revalue fixed assets at the time of admission of a new partner. However, if there is a significant change in the market value of the fixed assets, it may be revalued to reflect the current value accurately.

4. Investments: Investments refer to the shares, bonds, debentures, and other securities held by the partnership firm. It is not compulsory to revalue investments at the time of admission of a new partner. However, if there is a significant change in the market value of the investments, it may be revalued to reflect the current value accurately.

In conclusion, at the time of admission of a new partner, it is compulsory to revalue the goodwill of the partnership firm to determine its fair value. Revaluation of stock, fixed assets, and investments is not mandatory unless there are significant changes in their market values.