Revaluations, Financial Accounting

Revaluations

Partners rarely revalue their assets and any revaluations may be carried out when a new partner is being admitted or an old partner is retiring.  

To facilitate the process a revaluation account is opened whereby any revaluation gains are credited to he account while revaluation losses are debited to the account.  The balance in this account represents a profit or loss on revaluation, which is now transferred or closed off to the partners’ capital accounts according to their Profit Sharing Ratio (PSR)

NOTE:
On the profit or loss on revaluation

1) If the revaluation is carried out when a new partner is being admitted, then the new partner is not entitled to receive any share of the gain nor bear any loss.

Entries for the gain or loss are made only in the old partners’ capital accounts according to the old PSR.

2) If the revaluation is carried out on retirement of a partner, then the retiring partner is still entitled to a share of profit or loss. Therefore, the gain or loss will be adjusted for in all the partners’ capital accounts including the retiring one according to the old PSR.

3) In any other situation, e.g. the revaluation is carried out when there is a change in PSR then any gain or loss will be adjusted for in all the partners capital accounts but still the old PSR.

Posted Date: 12/11/2012 6:23:01 AM | Location : United States







Related Discussions:- Revaluations, Assignment Help, Ask Question on Revaluations, Get Answer, Expert's Help, Revaluations Discussions

Write discussion on Revaluations
Your posts are moderated
Related Questions
THE INCOME STATEMENT It shows the financial performance of the company during the given financial period. It discloses the income and expenses and thus the net profit for the per

Determine the Balancing risk and return All decision making involves future and business decision making is no exception. Only thing certain about the future, though, is that w

1.   Briefly explain what is "utility". Briefly explain which is worth more, a dollar today or a dollar in the future (in your explanation be sure and explain "why")? How does infl

Q. Example of Dividend valuation model? Dividend valuation model D 1 /P +g= 24(1.06)/ 428+ 0·06 = 0·119 or 11·9% An incorrect formula for the dividend evaluation model was u

As a recently hired accountant for a small business, Bearing, Inc., you are provided with last year's balance sheet, income statement, and post-closing trial balance to familiarize

what managers should know about internal rate of return( IRR) and why

The construction manager for Acme, Inc. must decide whether to build single-family homes, apartments, or condominiums. She estimates annual profits will vary with the economy, as f

Dawn's new car has a FMV of $20,000 and it weighs 3,000 pounds. The county also assessed a property tax on the car. The tax was 2% of its FMV and $10 per hundred weight. The car is

Cost of capital calculation Cost of equity (Ke) Using the dividend valuation model, Ke=D 1 /P 0 + g Pretentious that dividend growth over the last five years is a good