Question : Given below are two statements, one labelled as Assertion (A) and the other labeled as Reason (R):
Assertion (A): Revaluation A/c is prepared at the time of Admission of a partner.
Reason (R): The profit or loss on the revaluation of assets and liabilities, on reconstitution of firm, is related to old partners in their old ratio.
In the context of the above two statements, which of the following is correct?
Codes:
Option 1: Both (A) and (R) are correct and (R) is the correct Reason of (A).
Option 2: Both (A) and (R) are correct but (R) is not the correct Reason of (A).
Option 3: Only (R) is correct.
Option 4: Both (A) and (R) are wrong.
Correct Answer: Both (A) and (R) are correct and (R) is the correct Reason of (A).
Solution : Answer = Both (A) and (R) are correct and (R) is the correct Reason for (A).
Both the assertion and reason are correct. Revaluation accounts are often prepared during the admission of a new partner to adjust the value of assets and liabilities. The profit or loss resulting from the revaluation is typically allocated to the existing partners based on their old profit-sharing ratio, supporting the reason provided.
Hence, the correct option is 1.
