Revaluation Account in Partnership Changes

Steps:

• Identify revaluation account purpose: records unrealized gains/losses on assets/liabilities at fair value during partnership reconstitution.
• Check admission of new partner: revaluation needed to adjust values before profit-sharing ratio changes.
• Check retirement of partner: revaluation required to fairly distribute adjusted profits/losses to remaining partners.
• Check partnership sale: no revaluation, as dissolution involves full asset realization and settlement, not reconstitution.

Why B is correct:

• Per partnership accounting standards, revaluation account is prepared during reconstitution events like admission or retirement to equitably adjust capital accounts.

Why the others are wrong:

• A: Incorrectly includes 3; sale triggers dissolution, not revaluation.
• C: Omits 2; retirement requires revaluation for fair adjustment.
• D: Omits 1; admission necessitates revaluation for new profit-sharing.

Final answer: B