Practice Questions

Memorandum Revaluation Account is prepared when at the time of admission/retirement the partnership firm does not want to change the values of assets and liabilities in the balance but wants to give its effect through partners' capital accounts.  

This account has two parts and the first part is similar to the Revaluation A/c  Profit (loss) calculated is credited (debited) to old partners in their old profit sharing ratio.  In the second part the entries made in the first part are reversed and Profit (loss) of first part turns into loss (profit) ( in the second part.  This loss (profit) is debited (credited) to all partners including new partner in their new profit sharing ratio. Remember that no entries are made in the Assets/Liabilities accounts or Capital accounts.  Only one single adjustment will be passed.  The memorandum Revaluation A/c is just prepared to know the amounts by which the adjustment entry is to be passed

Divisible profits are the profits which are available for distribution as dividend. Every profit is not divisible profits. Capital reserve arising from revaluation of assets cannot form part of divisible profits.

Super profit is the excess of estimated future profit than the normal profit. It is a way of determining the extra profits that are earned by the business.

The difference between average profit and normal profit

Daimler Co, Ltd. Vs Continental Tyre and Rubber Co. Ltd.

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