AccountsISC Class 12 · Reconstitution of Partnership: Admission

Revaluation Account on Admission of a Partner: ISC Class 12 Accounts

Updated 15 October 2026 · Fact-checked

The Revaluation Account records changes in the values of assets and liabilities when a partner is admitted. Increases in assets, decreases in liabilities and unrecorded assets are credited; decreases in assets, increases in liabilities and unrecorded liabilities are debited. The balance, a profit or loss, belongs to the old partners and is shared in their old ratio.

Understand Revaluation Account on Admission

Why revalue? Book values are often out of date. Land may be worth more, stock less; a liability may have been missed. These changes happened while only the old partners owned the firm, so the gain or loss is theirs. If the firm did not revalue, a new partner would later share a gain he did nothing to earn, or bear a loss he did not cause. The CISCE syllabus requires a Revaluation Account 'where changes in the values of assets and liabilities are reflected in the new Balance Sheet' (the syllabus excludes the Memorandum Revaluation Account).

What goes where.

Credit (gains): increase in an asset; decrease in a liability; an unrecorded asset brought into the books; reduction in a provision.
Debit (losses): decrease in an asset; increase in a liability; an unrecorded liability brought into the books; creation or increase of a provision (e.g. provision for doubtful debts).

Provision for doubtful debts. Compare the new provision with the existing one. If debts are first written off, the new provision is a percentage of the *remaining* debtors. Revaluation debit = bad debts written off + new provision − old provision.

Special items.

Workmen compensation claim above the reserve, or a fall in investments above the Investment Fluctuation Reserve: the excess is debited to Revaluation.
A claim for damages or an outstanding expense not yet recorded: debit (a new liability).
A creditor who need not be paid, or accepts less: credit for the reduction.
A creditor paid off privately by a partner: not a revaluation item. Creditors A/c Dr; To that partner's Capital A/c. ISC examiners in 2025 noted this was often mistreated.

Closing the account. Profit: Revaluation A/c Dr; To Old Partners' Capital A/cs (old ratio). Loss: the reverse. Revalued figures then appear in the new Balance Sheet, which the syllabus asks you to prepare in horizontal format.

Check. The revaluation result always equals (net assets after revaluation − net assets before). Use it to check a long question.

Revaluation Account on Admission: key facts

Credited to Revaluation A/c (gains): Increase in assets
Decrease in liabilities
Unrecorded assets
Reduction in provisions
Debited to Revaluation A/c (losses): Decrease in assets
Increase in liabilities
Unrecorded liabilities
New or increased provisions
Excess WCR claim or excess fall in investments
Provision for doubtful debts: Revaluation debit = Bad debts written off + New provision − Existing provision; New provision on debtors after bad debts.
Revaluation profit or loss: Total credits − Total debits = Net assets after revaluation − Net assets before; Shared among old partners in the old ratio.
Creditor paid privately by a partner: Creditors A/c Dr → Partner's Capital A/c Cr; Not a revaluation item.

How to answer Revaluation Account on Admission questions

Revaluation is the first account in almost every ISC admission or retirement problem. Errors here flow into the capitals and the Balance Sheet.

1Go through each adjustment and mark it gain (credit) or loss (debit); calculate percentages on book values.
2Handle provisions by comparing new with existing; write off bad debts first.
3Prepare the Revaluation Account and find the profit or loss.
4Transfer it to old partners in the old ratio.
5Post reserves, goodwill and capital brought in to the capital accounts.
6Prepare the new Balance Sheet in horizontal format with revalued figures and check that it tallies.

Revaluation Account on Admission in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Old owners bear old changes in value

Suppose three friends run a delivery business. Their van is shown in the books at ₹3,30,000, but a dealer now values it at ₹3,00,000. A fourth friend is about to join as an equal partner.

Who should bear the ₹30,000 fall in the van's value, and how much each?

Try it first, then show the solutionSolution

The fall happened before the fourth friend joined, so it belongs to the three old partners.
Revaluation loss ₹30,000 shared equally: ₹10,000 each.

Answer: The three old partners bear ₹10,000 each; the newcomer starts with the van at its true value of ₹3,00,000.

Memory hook: Revalue before the door opens.

Tricks to remember Revaluation Account on Admission

Short memory aids. Say each one aloud once, then use it on a question the same day.

Assets up, liabilities down: credit
Anything that makes the firm richer is credited; anything that makes it poorer is debited.
Use it when: Sorting items quickly.
Unrecorded follows its nature
An unrecorded asset is a gain (credit); an unrecorded liability is a loss (debit).
Use it when: Hidden items in the question.
Old ratio for old changes
Revaluation profit or loss goes to the old partners in the old ratio.
Use it when: Closing the account.

Revaluation Account on Admission: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Unrecorded asset · 1 mark · MCQBoard level

On a partner's admission, investments worth ₹8,000 not recorded in the books are to be brought in. The Revaluation Account will be:
(a) debited with ₹8,000
(b) credited with ₹8,000
(c) unaffected; credit the new partner
(d) unaffected; credit General Reserve

Try it first, then show the solutionSolution

An unrecorded asset brought into the books is a gain.
Investments A/c Dr 8,000; To Revaluation A/c 8,000.

Answer: (b) credited with ₹8,000

Example 2: Basic Revaluation Account · 3 marks · Short answerBoard level

Asha and Bhavin share profits 2:1. On admitting Chirag: building is to be increased by ₹50,000; machinery reduced from ₹1,50,000 to ₹1,35,000; the provision for doubtful debts raised from ₹4,000 to ₹7,000; and an outstanding expense of ₹2,000 recorded. Find the revaluation result and each partner's share. (3 marks)

Try it first, then show the solutionSolution

Credit: building ₹50,000.
Debit: machinery ₹15,000; provision ₹3,000; outstanding expense ₹2,000; total ₹20,000.
Profit = ₹30,000: Asha ₹20,000, Bhavin ₹10,000.

Answer: Revaluation profit ₹30,000: Asha ₹20,000, Bhavin ₹10,000.

Example 3: Percentages and provisions · 3 marks · Short answerHarder board level

Dia and Ekam share profits 3:2. On admitting Fiza: stock of ₹80,000 is reduced by 10%; furniture of ₹40,000 is depreciated by 15%; a provision of 5% is to be made on debtors of ₹1,00,000 (existing provision ₹2,000); prepaid insurance of ₹1,500 not recorded is to be brought in. Calculate the revaluation result. (3 marks)

Try it first, then show the solutionSolution

Debits: stock ₹8,000; furniture ₹6,000; provision 5,000 − 2,000 = ₹3,000. Total ₹17,000.
Credit: prepaid insurance ₹1,500.
Loss = ₹15,500: Dia ₹9,300; Ekam ₹6,200.

Answer: Revaluation loss ₹15,500: Dia ₹9,300, Ekam ₹6,200.

Example 4: Revaluation, capitals and the new Balance Sheet · 6 marks · Long answerHarder board level

Hari and Isha share profits equally. Balance Sheet: Capitals Hari ₹1,20,000, Isha ₹80,000; General Reserve ₹20,000; Creditors ₹50,000 | Cash ₹20,000; Debtors ₹60,000; Stock ₹70,000; Plant ₹1,20,000. Jaya is admitted for one-third share (sacrificed equally). Plant is increased by ₹12,000; stock reduced by ₹7,000; a 5% provision is made on debtors; creditors include ₹4,000 that will not be paid. Jaya brings ₹1,00,000 capital and her premium in cash; goodwill is valued at ₹90,000. Prepare the capital accounts and the new Balance Sheet totals. (6 marks)

Try it first, then show the solutionSolution

Revaluation: Cr plant 12,000 + creditors 4,000 = 16,000; Dr stock 7,000 + provision 3,000 = 10,000; profit ₹6,000 (₹3,000 each).
General Reserve ₹10,000 each; premium = 90,000 × 1/3 = ₹30,000, ₹15,000 each.
Capitals: Hari 1,20,000 + 10,000 + 3,000 + 15,000 = ₹1,48,000; Isha 80,000 + 10,000 + 3,000 + 15,000 = ₹1,08,000; Jaya ₹1,00,000.
Liabilities: capitals 3,56,000 + creditors 46,000 = ₹4,02,000.
Assets: cash 20,000 + 1,30,000 = 1,50,000; debtors 57,000; stock 63,000; plant 1,32,000; total ₹4,02,000. It tallies.

Answer: Capitals ₹1,48,000, ₹1,08,000 and ₹1,00,000; Balance Sheet total ₹4,02,000.

Example 5: Claim for damages and a creditor settled by a partner · 6 marks · Long answerHOTS / competency

Kunal and Leela share profits 3:1. On admitting Mansi: a claim for damages of ₹9,000 is to be provided; machinery is overvalued by ₹10,000; the provision for doubtful debts is to be 10% of debtors of ₹80,000 (existing ₹5,000); a creditor of ₹12,000 is settled by Kunal privately for ₹11,000; prepaid rent of ₹4,000 is unrecorded. Prepare the Revaluation Account and pass the entry for the creditor. (6 marks)

Try it first, then show the solutionSolution

Creditor: Creditors A/c Dr 12,000; To Kunal's Capital 11,000; To Revaluation A/c 1,000 (the ₹1,000 saved is a gain to the firm).
Debits: claim 9,000; machinery 10,000; provision 8,000 − 5,000 = 3,000; total ₹22,000.
Credits: creditor saving 1,000; prepaid rent 4,000; total ₹5,000.
Loss = ₹17,000: Kunal ₹12,750; Leela ₹4,250.

Answer: Revaluation loss ₹17,000 (Kunal ₹12,750, Leela ₹4,250); Kunal's capital also credited ₹11,000 for the creditor he paid.

Example 6: Finding a missing liability · 3 marks · Short answerHOTS / competency

After revaluation on admission the firm shows a revaluation profit of ₹15,000. The only changes were: building increased by ₹25,000, provision for doubtful debts increased by ₹4,000, and an unrecorded liability brought into the books. Find the unrecorded liability. (3 marks)

Try it first, then show the solutionSolution

Credits − debits = 15,000.
25,000 − 4,000 − X = 15,000.
X = ₹6,000.

Answer: Unrecorded liability = ₹6,000.

Where students lose marks in Revaluation Account on Admission

The slips examiners see most often, and what to write instead.

Mistake: Sharing revaluation profit with the new partner
Using the new ratio.
Wrong working
Profit 6,000 shared 1:1:1
Right working
Profit 6,000 shared 1:1 between Hari and Isha
Do this: Revaluation relates to the period before admission.
Usually costs: 1-2 marks.
Mistake: Debiting the whole new provision
Ignoring the existing provision.
Wrong working
Revaluation Dr 8,000
Right working
Revaluation Dr 8,000 − 5,000 = 3,000
Do this: Only the increase is a loss.
Usually costs: 1 mark.
Mistake: Passing a privately paid creditor through Revaluation
Treating it as a decrease in liability alone.
Wrong working
Creditors Dr 12,000; To Revaluation 12,000
Right working
Creditors Dr 12,000; To Kunal's Capital 11,000; To Revaluation 1,000
Do this: The partner who paid must be credited; 2025 examiners flagged this.
Usually costs: 1-2 marks.
Mistake: Posting on the wrong side
Mixing up gains and losses.
Wrong working
By Machinery (decrease) 10,000
Right working
To Machinery 10,000
Do this: Losses on the debit ('To'), gains on the credit ('By').
Usually costs: 1 mark per item.

Exam tips

Write each item's calculation (10% of ₹80,000 = ₹8,000) in the narration column or a working note.
Label accounts correctly ('Creditors', not 'Commission'); 2025 examiners noticed wrong names.
Show the new Balance Sheet in horizontal format, as the syllabus requires.
Cross-check the revaluation result as the change in net assets.

Practice questions on Revaluation Account on Admission

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
An increase in the value of a liability on revaluation is:
(a) credited to Revaluation A/c
(b) debited to Revaluation A/c
(c) credited to old partners directly
(d) ignored
Hint
Does the firm become richer or poorer?
Answer
(b) debited to Revaluation A/c
Q2 · 1 mark · MCQBoard level
Profit on revaluation at the time of admission is shared by:
(a) all partners in the new ratio
(b) old partners in the old ratio
(c) old partners in the sacrificing ratio
(d) the new partner only
Hint
Whose period?
Answer
(b) old partners in the old ratio
Q3 · 3 marks · Short answerBoard level
On admission: land increased by ₹40,000; stock reduced by ₹6,000; outstanding salary of ₹3,000 recorded. Old partners share 3:2. Find the revaluation result and shares. (3 marks)
Hint
40,000 − 9,000.
Answer
Profit ₹31,000: ₹18,600 and ₹12,400.
Q4 · 3 marks · Short answerHarder board level
Debtors ₹50,000; provision ₹2,500. Bad debts of ₹2,000 are to be written off and the provision kept at 5%. Calculate the amount debited to Revaluation A/c. (3 marks)
Hint
Provision on ₹48,000.
Answer
New provision = 5% of 48,000 = 2,400. Debit = 2,000 + 2,400 − 2,500 = ₹1,900.
Q5 · 3 marks · Short answerHarder board level
On admission, a creditor of ₹8,000 is paid off by partner Rina from her private funds. Pass the entry and state whether the Revaluation Account is affected. (3 marks)
Hint
Who is now owed the money?
Answer
Creditors A/c Dr 8,000; To Rina's Capital A/c 8,000. Revaluation is not affected because the liability is not revalued; it is transferred to Rina.
Q6 · 6 marks · Long answerHarder board level
Old partners share 2:3. On admission: building ₹3,00,000 appreciated by 20%; machinery ₹1,00,000 depreciated by 10%; investments of ₹50,000 have a market value of ₹46,000 (no reserve); an unrecorded computer worth ₹7,000 is found; outstanding rent of ₹3,000 is recorded. Prepare the Revaluation Account result and shares. (6 marks)
Hint
Credits 67,000; debits 17,000.
Answer
Credits: building 60,000 + computer 7,000 = 67,000. Debits: machinery 10,000 + investments 4,000 + rent 3,000 = 17,000. Profit ₹50,000: ₹20,000 and ₹30,000.
Q7 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Revaluation profit on admission is credited to the old partners only.
Reason (R): The change in values relates to the period before the new partner's admission.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Timing of the gain.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q8 · 6 marks · Long answerHarder board level
A firm's Balance Sheet totals ₹5,00,000. On admission, assets increase by ₹30,000 net and liabilities by ₹10,000, giving a revaluation profit of ₹20,000. The new partner brings ₹1,50,000 capital and ₹30,000 premium, both retained. What is the new Balance Sheet total? Verify from both sides. (6 marks)
Hint
Assets side and liabilities side separately.
Answer
Assets: 5,00,000 + 30,000 + 1,50,000 + 30,000 = ₹7,10,000. Liabilities: 5,00,000 + 10,000 + 20,000 (revaluation to capitals) + 1,50,000 + 30,000 (premium to sacrificers' capitals) = ₹7,10,000.
Q9 · 6 marks · Long answerHOTS / competency
Old partners share 4:3. On admission: Workmen Compensation Reserve ₹15,000 against a claim of ₹21,000; stock reduced by ₹5,000; land increased by ₹18,000. Find the revaluation result and shares. (6 marks)
Hint
Only the excess claim is debited.
Answer
Debits: excess claim 6,000 + stock 5,000 = 11,000; credit land 18,000. Profit ₹7,000: ₹4,000 and ₹3,000.
Q10 · 3 marks · Short answerHOTS / competency
Land is worth ₹40,000 more than its book value when Neha joins for one-fourth share, but the firm does not revalue. Later the land is sold at that value. Explain the effect on Neha and the old partners. (3 marks)
Hint
Who shares the later gain?
Answer
The ₹40,000 gain is shared in the new ratio, so Neha gets ₹10,000 of a gain that arose before she joined, and the old partners lose that amount. Revaluation on admission prevents this.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Is a decrease in an asset debited or credited to Revaluation?Show answer
Debited.
2.Existing provision ₹3,000; new provision ₹5,000: Revaluation entry?Show answer
Debit ₹2,000.
3.In what format does ISC want the new Balance Sheet?Show answer
Horizontal format.
4.Revaluation loss ₹12,000, old ratio 2:1: shares?Show answer
₹8,000 and ₹4,000.
5.Is the Memorandum Revaluation Account in the ISC syllabus?Show answer
No, it is excluded.

Revaluation Account on Admission: frequently asked questions

Why is the Revaluation Account also called the Profit and Loss Adjustment Account?

It adjusts the firm's profit or loss for changes in asset and liability values at the time of reconstitution.

Do revalued figures appear in the new Balance Sheet?

Yes. Under the Revaluation Account method in the ISC syllabus, assets and liabilities are shown at their revised values.

What if a liability is found to be unrecorded?

Bring it into the books and debit the Revaluation Account, since it reduces the firm's net assets.

Is goodwill part of revaluation?

No. Goodwill is dealt with separately through premium or the new partner's current account.