Why there is need for the revaluation of assets and liabilities on the admission of a partner?
When a new partner joins the firm, it is very important to revalue the assets and liabilities of the firm for asertaining its true and fair values.This is done because the value of assets and liability may have increased or decreased and consequently their corresponding figures in old balance sheet may either be understated or overstated.Moreever it may also be possible that some of assets and liabilites are left unrecorded.
Thus in order to record the increase and decrease in the market value of assets and liabilities,revaluation account is created and any profit or losses associated with this increase or decrease are distributed among the old partners of the firm.
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