Question

State Whether the following Statement is True or False:

All accumulated profits and losses are transferred to the Revaluation Account at the time of admission of a partner.

Answer 1

The statement is false.

Explanation:

• Accumulated profits and losses are not transferred to the Revaluation Account.
• They represent past earnings or losses that belong entirely to the existing partners.
• Therefore, they are transferred directly to the Old Partners' Capital/Current Accounts in their Old Profit Sharing Ratio.
• The Revaluation Account is strictly used to record current changes in the values of assets and liabilities.