what is memorandum revaluation account? why and how is it prepared?

Memorandum Revaluation Account is an account that is prepared at the time of reconstitution of a partnership firm. This account is divided into two parts. The first part is same as Revaluation Account in which any decrease in assets and increase in liabilities is recorded on the debit side and increase in assets and decrease in liabilities is recorded on the credit side of the account. The profit or loss from the revaluation is transferred to the Old partners- for admission (or All Partners- for retirement and death) in their old ratio . In the second part of this account, whatever is debited in the first part is credited and in the similar manner, whatever is credited above is debited. Accordingly, if in the first part there exists a profit then naturally there will be loss in the second part and vice-versa. The profit or loss from this part is transferred to the All Partners’ Capital Accounts- for admission (including new partner) in the new ratio and in case of retirement/death it is transferred to the Continuing Partners’ Capital Accounts (excluding the retired/deceased partner) in their new ratio. Memorandum Revaluation Account is prepared when partners want to show assets and liabilities at their original values and not at their revalued figures.

Moreover, as per the CBSE guideline, this is not in syllabus for Grade-XII for the year 2015-16.

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