Revaluation Profit Allocation in Partnerships

Steps:

• Identify the purpose of revaluation: Adjust asset values before partnership changes like admission or retirement.
• Recognize revaluation profit as arising from asset appreciation, not realized through sale.
• Recall partnership accounting rule: Unrealized profits go to capital accounts to reflect long-term ownership adjustments.
• Distinguish from current accounts, which handle realized profits, drawings, and interest.

Why B is correct:

• Revaluation profit is unrealized (no asset sale), so crediting capital accounts maintains partners' long-term equity shares per partnership deed rules.

Why the others are wrong:

• A: Capital accounts represent fixed contributions, but revaluation ties to unrealized gains, not just asset duration.
• C: Retirement benefits from adjusted capitals, but allocation isn't designed for higher payouts—it's for fair equity.
• D: Interest on capital is based on balances, but revaluation credits aim at accurate valuation, not boosting interest.

Final answer: B