Solution 1. Revaluation Account is an account that is opened at the time of admission, retirement and death of a partner. This account records the effect of every increase or decrease in the value of assets and liabilities.

When and why revaluation account is opened?

In accounting, revaluation account implies an account opened by the firm to keep a record of gains or losses, when assets are revalued, and liabilities are reassessed, on reconstitution of the firm. Reconstitution of the firm occurs in the following forms: Admission of a new partner.

Why revaluation account is opened?

A Revaluation Account is prepared in order to ascertain net gain or loss on revaluation of assets and liabilities and bringing unrecorded items into books. The Revaluation profit or loss is transferred to the capital account of all partners including retiring or deceased partners in their old profit sharing ratio.