Partnership

Revaluation of Assets

1
Introduction
Assets should be revalued when there is
a change in the partnership, such as:
 Admission of new partner
 Retirement/ withdrawal of partners
 Change in the profit sharing ratio

2
Dr Assets With decrease in value
Cr Revaluation of assets
Dr Revaluation With increase in value of
Cr Assets assets
Dr Revaluation With increase in
Cr Provision for bad provision for bad debts
debts
Dr Revaluation With profit on
Cr Capital revaluation (sharing
among partners,
according to old profit-
sharing ratio
Dr Capital With loss on revaluation
Cr Revaluation (shared among partners,
according to the old
profit-sharing ratio) 3
Example 1

4
 Tang, Wong and Fong were in partnership, sharing
profits and losses equally.
On 1 April 1996, tang decided to retire from the
business and Lee joined as a new partner.
The new profit-sharing ratio among Wong, Fong and
Lee became 2:2:1 respectively
No entry has been made for the change of
partnership.
Balance sheet as at 1 April 1996
Fixed assets Capital: Tang 1000000
Premises 2400000 Wong 600000
Furniture & fitting 200000 Fong 800000
Motor vehicles 400000 Current:Tang 200000
Current assets Wong 100000
Stock 650000 Fong 100000
Debtors 450000 Liabilities
Cash 300000 1400000 Creditors 1600000
5
4400000
 Additional information:
1. Goodwill is to be revalued at $60000
2. The assets are revalued as follows:
Premises $2600000
Furniture $191000
Motor vehicles $350000
Provision for bad debts 10% of debtors
3. Tang took out cash $500000 and left the balance to
the business as a loan
4. Lee introduced $600000 cash and a vehicle of
$200000 into the business

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 Revaluation
Increase in value: Decrease in value:
Furniture 9000 Premises 200000
Motor vehicles 50000 Goodwill 60000
Provision for bad debts 45000
Tang 52000
Wong 52000
Fong 52000 156000
260000 260000
Goodwill
Revaluation 60000 Bal b/f 60000

Capital
Tang Wong Fong Lee Tang Wong Fong Lee
Cash 500000 Bal b/f 1000000 600000 800000
Loan 752000 Revaluation 52000 52000 52000
Bal c/f 652000 852000 800000 Current 200000
Cash 600000
Vehicle 200000
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1252000 652000 852000 800000 1252000 652000 852000 800000
 Wong, Fong and Lee
Balance sheet as at 1 April 1996
Fixed assets
Goodwill 60000
Premises 2600000
Furniture New values 191000
Motor vehicles (350000+200000) 550000
3401000
Current assets
Stock 650000
Debtors 450000
Less provision for bad debts 4500 405000
Cash (300000+600000-500000) 400000
1455000
Less: Current liabilities
Creditors 1600000

(145000)
3256000

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Capital: Wong 652000
Fong 852000
Lee 800000

Current: Wong 100000

Fong 100000

Long term liabilities

Loans from Tang 752000
3256000