A partnership of X and Y has a profit sharing ratio of $4:1$ and net assets (book value) of $\text{Rs.}1,20,000$. On the admission of a new partner Z, the assets are revalued: building is increased by $\text{Rs.}20,000$ and stock is decreased by $\text{Rs.}5,000$. What amount should be credited to the revaluation reserve?

Step-by-step solution

1. Calculate the increase in value: building up by $\text{Rs.}20,000$.
2. Calculate the decrease in value: stock down by $\text{Rs.}5,000$.
3. Net revaluation surplus = increase – decrease = $20,000-5,000=15,000$.
4. The surplus is credited to the revaluation reserve, so the amount is $\text{Rs.}15,000$.

Concept tested: Revaluation of assets on admission

Published 23 September 2026 · How this solution was prepared and checked