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Bonnie
Bonnie
In: 1. Financial Accounting > Partnerships

Difference between revaluation account and realization account?

Difference between revaluation account and realization account?
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    1 Answer

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    1. PriyanshiGupta Graduated, B.Com
      2021-12-14T18:27:11+00:00Added an answer on December 14, 2021 at 6:27 pm
      This answer was edited.

      A revaluation Account is an account created to record the changes in the value of assets and liabilities during:

      • Change in profit sharing ratio
      • Admission of a partner
      • Retirement of a partner
      • Death of a partner

      The realization Account is prepared to sell assets and pay liabilities in the event of the dissolution of the firm.

      Revaluation Account is prepared for dissolution of the partnership while Realization Account is prepared for dissolution of the partnership firm.

      The increase or decrease in the value of assets and liabilities is transferred to the Realisation Account and the gain or loss thereof is transferred to the old partner’s capital account.

      • A decrease in Assets and an Increase in Liabilities is debited since it is a loss for the firm and all the losses are debited.
      • An increase in Assets and a Decrease in Liabilities is credited since it is gained for the firm and all the profits are credited.

      Format of Revaluation Account will be:

       

      Format of Realization Account will be:

       

      The difference between Realisation and Revaluation Account is:

      Revaluation Account Realization Account
      Prepared to record changes in assets and liabilities Prepared to record sale of assets and payment of liabilities
      Prepared at the time of dissolution of the partnership Prepared at the time of dissolution of partnership firm
      Assets and liabilities still exist in the books only their values change Assets and liabilities do not exist in the books of the firm
      This account contains only those assets and liabilities that are to be revalued. This account contains all the assets and liabilities of the firm.
      A revaluation Account can be prepared any number of times during the lifetime of the firm. The realization Account is only made once during the dissolution of the firm.
      The gain or loss during revaluation is transferred to the old partner’s capital accounts. The gain or loss during realization is transferred to the capital account of all the partners.

       

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