Entries to record the revaluation of assets and liabilities:
1. For profit items
*Increase in the value of assets:
Assets A/C...............Dr.(increase in value)
To Revaluation A/c
*Decrease in the value of liabilities:
Liabilities A/C...........Dr.(Decrease in value)
To Revaluation A/C
*Unrecorded assets brought into account:
Assets A/c............Dr.(unrecorded value)
To Revaluation A/C
2. For Loss Items
*Decrease in the value of assets:
Revaluation A/c..............Dr.(Decrease in value)
To assets A/C
*Increase in the value of liabilities:
Revaluation A/C............Dr.(Increase in value)
To liabilities A/C
*Unrecorded liability brought into account:
Revaluation A/C.........Dr.(unrecorded value)
To liability A/C
3. For transferring profit/loss on revaluation
Profit:
Revaluation A/C...........Dr.
To old partners' capital/current A/c
Loss:
Old partners' capital.current A/c..........Dr.
To Revaluation A/c
Specimen Of Revaluation Account
Particulars........................................Amt.........Particulars...............................Amt.
To Assets(decrease in value).........XXX........By Assets(increase in value)......XXX
To liabilities(increase in value.........XXX........By liabilities(decrease in value)..XXX
To provision for depreciation..........XXX.......By provision for depreciation.......XXX
To provision for doubtful debt.........XXX.......By provision for doubtful debt......XXX
To unrecorded liabilities recorded...XXX.......By unrecorded assets records.....XXX
To profit transfer..............................XXX.......By loss transfer............................XXX
Note:
* Profit and loss adjustment A/C may also be written
* profit/loss are transferred to capital/current accounts in old profit sharing ratio.
When Revised Values Are Not Be Shown In The Balance Sheet:
All the partners including new one may also agree to show the original values, not the revised values of assets and liabilities in the new balance sheet. In such case, all entries passed through revaluation account are reversed. That is , if revaluation A/C was debited and plant A/C credited earlier. How the plant A/C would be debited and revaluation A/C be credited. Subsequently, a new revaluation A/C comes into existence. This new revaluation A/C is closed by transferring the balance to all the partners including new one is new profit sharing ratio. Thus the revaluation account under such circumstances termed as memorandum revaluation A/C, which is divided into two parts. When such memorandum revaluation A/C is prepared, entries that change the values of assets/liabilities are not passed. The only entry made relate to the transfer of profit or loss from first part to old partners' capital A/Cs in old profit sharing ratio and then, the transfer of loss or profit from the second part to all partners' capital A/Cs including new one in new profit sharing ratio. If the first part shares profit, the second part will show loss and vice versa. But it should be noted that, in new balance sheet, assets and liabilities except cash will appear at the original values.
