Question

State the following statement is true:

A ‘Revaluation Account’ is opened on the dissolution of a firm.

Answer 1

This statement is false.

Explanation:

A revaluation account is typically opened during events such as the reconstitution of a partnership, not on its dissolution. The purpose of a revaluation account in the context of reconstitution is to record changes in the value of assets and liabilities when a new partner is admitted or when an existing partner retires. However, during the dissolution of a firm, a realisation account is opened instead to record the sale of assets and settlement of liabilities, and not a revaluation account.