GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The new partner should not be benefitted from any appreciation in the value of assets.
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The new partner should not suffer because of any depreciation in the value of assets.
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The new partner should not benefit from any diminution in liabilities or suffer from any appreciation in liabilities.
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All of the above
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Detailed explanation-1: -Ans. It is necessary to revalue assets and liabilities so that the incoming partner does not suffer from the previous values stated in the balance sheet. These values are either overstated or understated and so does not bring a true market value of fixed assets and liabilities.
Detailed explanation-2: -Q. At the time of retirement, the assets and liabilities are revalued so that the partners’ share in profit/loss due to revaluation can be ascertained.
Detailed explanation-3: -At the time of admission of a new partner, the assets are re-valued and liabilities are reassessed. The assets are re-valued and liabilities are reassessed so that: The assets are overstated or understated are revalued. The liabilities are brought in the books at their correct values.
Detailed explanation-4: -Assets are originally recorded at its original price, but when certain events occurred, such as 1) a new partner is admitted, 2) or a partner leaving the firm and 3) if the partners change their profit or loss sharing ratios, the assets will have to be revalued.
Detailed explanation-5: -At the time of reconstitution of partnership, it is necessary to revalue the assets to get its true value. The value of assets may have increased or decreased over time and their figures in the old balance sheet may be either undervalued or overvalued, it can also happen that some of the assets are left unrecorded.