Why should assets and liabilities be revalued on the reconstitution of a partnership firm? Explain briefly giving examples.
Reassessment of assets and liabilities is required at the time of reconstitution of partnership as the value of the assets and liabilities may have increased or decreased since the last balance sheet was created. There are cases wherein new assets/liabilities have to be recorded. Revaluation account is prepared at the time of admission of partner to give the affect to above adjustments and of any profit/ loss arising out of such revaluation to be distributed amongst the old partners.