Question

Ravi and Gaurav are partners in a firm. They want to admit Dhruv for `1/4`th share in profit. For this, they revalued their machinery from ₹ 30,000 to ₹ 40,000 and creditors from ₹ 1,10,000 to ₹ 1,00,000. What journal entry will be passed:

Options

• Machinery A/c  Dr.
  Creditors A/c    Dr.
     To Revaluation A/c

• Machinery A/c    Dr.
  Revaluation A/c  Dr.
      To Creditors A/c

• Machinery A/c  Dr.
      To Revaluation A/c
      To Creditors A/c

• None of the above

Answer 1

Machinery A/c  Dr.
Creditors A/c    Dr.
   To Revaluation A/c

Explanation:

Increases in assets are debited, and decreases in liabilities are credited to the revaluation account.