Question

Ayub and Anita were partners sharing profits and losses in the ratio of 3:2. They decided that from 1st April, 2015 they will share profits and losses equally. On that date, Revaluation Account was prepared. It was noticed that an unrecorded asset (Computer Printer) valued at Rs.5,000 existed. Ayub was of opinion that it should be credited to the Revaluation Account. Anita was of the opinion that it should be credited to the Capital Accounts in equal proportion. Anita agreed to the views of Ayub. Explain what arguments must have been put forward by Ayub to which Anita agreed.

Answer 1

At the time of change in the profit-sharing ratio, any asset found unrecorded is credited to the Revaluation Account and the net result of the Revaluation Account (revaluation profit or revaluation loss) is debited/credited to the Partners’ Capital Accounts in their old profit-sharing ratio. Ayub must have stated the above accounting practice to Anita to convince her.