Question

Assertion (A): Assets are revalued and liabilities are reassessed in case of dissolution of partnership.

Reason (R): A Revaluation Account is prepared on dissolution of partnership and gain or loss on revaluation is distributed between the partners.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct and (R) is the correct reason of (A).

Explanation:

Assets are revalued and liabilities are reassessed at the time of dissolution of partnership. A revaluation account is prepared to record these changes and the resulting gain or loss on revaluation is distributed among the partners. Thus, the reason correctly explains the assertion.