A and B are partners of a partnership firm sharing profits in the ratio of 3 : 2 respectively. C was admitted for a 1/5th share of profit. Machinery is overvalued by 10% (book value of ₹ 1,32,000), and building is undervalued by 10% (book value of ₹ 5,40,000). Unrecorded debtors of ₹ 10,000 would be brought into the books. What will be the gain/loss on revaluation?

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Gain ₹ 58,000 Explanation: Dr. REVALUATION ACCOUNT Cr. Particulars Amount (₹) Particulars Amount (₹) To Machinery 12,000 By Building 60,000 To Gain on Revaluation transferred to Capital A/cs 58,000 By Debtors 10,000 70,000 70,000 Actual Value of Machinery = 1,32,000 xx $\frac{100}{110}$ = 1,20,000 Difference in actual value and book value = 1,32,000 − 1,20,000 = 12,000 Actual Value of Building = 5,40,000 xx $\frac{100}{90}$ = 6,00,000 Difference in actual value and book value = 6,00,000 − 5,40,000 = 60,000

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