Question

State Whether the following Statement is True or False:

At the time of change in profit sharing ratio among existing partners, an unrecorded liability is credited to Revaluation Account.

Answer 1

The statement is false.

Explanation:

• An unrecorded liability is a loss for the firm because it increases what the business owes.
• According to accounting rules, all losses must be debited to the Revaluation Account.
• Crediting the Revaluation Account is only done for gains (like unrecorded assets or a decrease in liabilities).