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Why Do Firm Revaluate Assets and Reassess Their Liabilities on Retirement Or on the Event of Death of a Partner? - Accountancy

Short Note

Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?

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Solution

At the time of retirement or death of a partner, it becomes inevitable to revalue the assets and liabilities of the firm for ascertaining their true and fair values. The revaluation is necessary as the value of assets and liabilities may increase or decrease with the passage of time. Further, it may be possible that there are certain assets and liabilities that remained unrecorded in the books of accounts. The retiring or the deceased partner may be benefited or may bear loss due to change in the values of assets and liabilities. Therefore, the revaluation of the assets and liabilities is necessary in order to ascertain the true profit or loss that is to be divided among all the partners in their old profit sharing ratio.

Concept: Retirement Or Death of a Partner - Revaluation of Assets and Liabilities
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner
Exercise | Q 4 | Page 214
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