Question

Assertion (A): Revaluation A/c is prepared at the time of Admission of a partner.

Reason (R): It is required to adjust the values of assets and liabilities at the time of admission of a partner, so that the true financial position of the firm is reflected.

Options

• Both (A) and (R) are correct, and (R) is the correct reason for (A)

• Both (A) and (R) are correct, but (R) is not the correct reason for (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 for (A)

Explanation:

Both Assertion (A) and Reason (R) are true and logically connected. Assertion (A) confirms that a Revaluation Account is indeed prepared when a new partner is admitted. Reason (R) provides the exact justification for this accounting practice. The purpose of revaluation is to adjust asset and liability values to their current market figures, ensuring the new partner enters the firm with an accurate, “true financial position,” and that pre-admission gains or losses are allocated only to the old partners. Thus, the reason correctly explains the assertion.