REVALUATION ACCOUNT

REVALUATION ACCOUNT

Revaluation account is a nominal account. It is prepared in case when partners want to alter or revise the value of assets and liabilities. It is opened with a purpose to ascertain profit or loss occurring due to increase or decrease in assets and liabilities. An increase in the value of assets and decrease in the value of liabilities is credited to this Account. On the other hand, decrease in the value of assets and increase in the value of liabilities is debited to Revaluation Account. The difference of the debit and credit side will be Profit/ Loss. It is prepared by the Partnership firms.

PURPOSE

Revaluation Account is prepared to determine the profit or loss arising out of revaluation, specifically when partners have decided to alter the value of assets and liabilities.

ACCOUNTING TREATMENT

ITEMS	ENTRY	REASON
Increase in Assets	Asset A/c             Dr.     To Revaluation A/c	Increase in the value of assets is a gain.
Decrease in Assets	Revaluation A/c   Dr.       To Assets A/c	Decrease in the value of assets is a loss.
Unrecorded Assets brought into the books	Assets A/c           Dr.     To Revaluation A/c	Addition to the assets is a gain.
Decrease in Liabilities	Liabilities A/c      Dr.     To Revaluation A/c	Decrease in the liabilities is a gain.
Increase in Liabilities	Revaluation A/c   Dr.        To Liabilities A/c	Increase in the Liabilities is a loss.
Creating Provisions	Revaluation A/c   Dr.        To Provision A/c	It reduces profit.
Unrecorded Liabilities brought into the books	Revaluation A/c   Dr.        To Liabilities A/c	Addition to the Liabilities is a Loss.

SPECIMEN OF REVALUATION ACCOUNT

                 REVALUATION ACCOUNT                             

PARTICULARS	₹	PARTICULARS	₹
To Assets A/c (Decrease in Assets) To Liabilities A/c (Increase in Liabilities) To Provisions A/c (Creation of Provisions) To Profit (B.F.) (Partner’s Capital)		By Assets A/c (Increase in Assets) By Unrecorded Assets By Liabilities A/c (Decrease in Liabilities) By Provisions A/c (Decrease in Provision) BY Loss (B.F.) (Partner’s Capital A/c)