Why is "Confusing the revaluation and realisation accounts" a common mistake in Revaluation and Realisation Account?

Why it happens: Both find a profit/loss on partner accounts. How to avoid it: Revaluation = firm CONTINUES (assets not sold); realisation = firm DISSOLVED (assets sold). Source: 9706 Examiner Reports

Why is "Sharing revaluation profit in the new ratio" a common mistake in Revaluation and Realisation Account?

Why it happens: Using the post-change ratio. How to avoid it: Revaluation profit/loss belongs to the OLD partners — share it in the OLD ratio. Source: 9706 Examiner Reports

Why is "Transferring assets to realisation at a value other than book" a common mistake in Revaluation and Realisation Account?

Why it happens: Using sale value on transfer. How to avoid it: Transfer assets to realisation at BOOK value; record proceeds separately when they are sold. Source: 9706 Examiner Reports

Why is "Bank account not balancing to zero on dissolution" a common mistake in Revaluation and Realisation Account?

Why it happens: Missing a receipt or payment. How to avoid it: All cash in (proceeds, capital paid in) must equal all cash out — the bank must close at zero. Source: 9706 Examiner Reports

Why is "Paying partners before external creditors" a common mistake in Revaluation and Realisation Account?

Why it happens: Ignoring the priority order. How to avoid it: Pay external creditors first, then partners' loans, then partners' capital. Source: 9706 Examiner Reports

Why is "Sharing a Garner v Murray deficiency in the profit-sharing ratio" a common mistake in Revaluation and Realisation Account?

Why it happens: Defaulting to the PSR. How to avoid it: Garner v Murray shares the deficiency in the ratio of LAST AGREED CAPITALS, not the PSR. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Revaluation and Realisation Account

0% Complete

Detailed Study Notes

Detailed notes on Financial statements for Partnerships for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

Revaluation & Realisation Accounts — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

Two key partnership accounts. The revaluation account restates assets to fair value when the partnership continues but changes; the realisation account records the sale of assets when the partnership is dissolved (wound up). Learn how to prepare each and share the resulting profit or loss.

At a glance

Revaluation account: used when the partnership continues but changes (admission, retirement, ratio change).
Realisation account: used when the partnership is dissolved (the business is wound up and assets sold).
Both calculate a profit or loss, shared between partners in the appropriate ratio.
Revaluation: record increases/decreases in asset values; gain/loss shared in the OLD ratio (capital accounts).
Realisation: transfer assets at book value, record their sale proceeds and the settlement of liabilities.
Realisation profit/loss (proceeds − book values − costs) is shared in the profit-sharing ratio.
On dissolution, the partners' final capital balances are settled with the available cash.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

3.1.2 — Prepare a revaluation account on a change in the partnership.
3.1.3 — Prepare a realisation account on the dissolution of a partnership.
Share the revaluation/realisation profit or loss between the partners.

The revaluation account

Restates assets to fair value when the partnership changes but continues.

When a partnership changes but continues (a partner joins, retires, or the ratio changes), the assets are usually revalued to fair value so the change is fair. The revaluation account records the increases and decreases:

Revaluation account	Dr	Cr
Decreases in asset values / increases in liabilities	X
Increases in asset values / decreases in liabilities		X
Profit on revaluation (if Cr > Dr) → to old partners	balancing

An increase in an asset's value (e.g. premises) → credit revaluation.
A decrease (e.g. inventory written down, a new provision for doubtful debts) → debit revaluation.
The balance is the profit or loss on revaluation, shared among the old partners in the OLD profit-sharing ratio and posted to their capital accounts.

The revaluation account is a one-off account opened only at the date of change; the revalued figures may then be kept in the books.

Used when the partnership changes but continues.
Asset increase → credit; asset decrease → debit revaluation.
Balance = profit/loss on revaluation.
Shared among OLD partners in the OLD ratio (capital accounts).

See the full worked example for revaluation and realisation account →

The realisation account

Records the sale of assets and settlement of liabilities when the firm is wound up.

When a partnership is dissolved (the business ceases and is wound up), a realisation account records the process of turning assets into cash and settling debts:

Realisation account	Dr	Cr
Assets transferred at book value	X
Sale proceeds of assets		X
Dissolution costs	X
Discounts received / liabilities settled below book		X
Profit on realisation (if Cr > Dr) → partners	balancing

Steps:

Transfer assets to the realisation account at their book value (Dr realisation, Cr each asset).
Record the proceeds when assets are sold (Dr Bank, Cr realisation) — or taken over by a partner (Dr that partner's capital).
Record dissolution costs (Dr realisation).
Settle liabilities (Dr the liability, Cr Bank) — any saving (paying less than book) is a credit to realisation.
The balance is the profit or loss on realisation, shared in the profit-sharing ratio and posted to capital accounts.

Used when the partnership is dissolved (wound up).
Transfer assets at book value (Dr realisation).
Record sale proceeds and dissolution costs.
Balance = profit/loss on realisation, shared in the PSR.

See the full worked example for revaluation and realisation account →

Revaluation vs realisation

Revaluation = business continues; realisation = business ends.

The two accounts are easily confused — the key is whether the business continues:

	Revaluation account	Realisation account
When	Partnership changes but continues	Partnership is dissolved
Purpose	Restate assets to fair value	Sell assets, settle debts
Assets	Not sold — just revalued	Sold (or taken over)
Profit/loss shared in	OLD ratio (a change)	Profit-sharing ratio
After	Business carries on	Business ends

So if a partner joins or leaves and the firm continues → revaluation. If the firm closes down → realisation. Both produce a profit or loss shared via the capital accounts, but for very different reasons.

Revaluation: business changes but continues; assets revalued, not sold.
Realisation: business dissolved; assets actually sold.
Revaluation profit/loss → old ratio; realisation profit/loss → PSR.
Decide which by asking: does the business continue?

See the full worked example for revaluation and realisation account →

Completing a dissolution

Settle capital accounts with the available cash after realisation.

After the realisation account is closed, a dissolution is completed through the bank/cash account and the partners' capital accounts:

Realisation profit/loss is posted to the capital accounts (in the PSR).
Loans from partners are repaid (after external liabilities).
Each partner's final capital balance is then settled with the remaining cash:
- a partner with a credit balance is paid out;
- a partner with a debit balance must pay in to the firm.

If a partner cannot pay a debit balance (insolvency), the Garner v Murray rule may apply — the deficiency is borne by the solvent partners in the ratio of their last agreed capitals (an A* refinement). The bank account must balance to zero at the end — all cash received equals all cash paid out — which is the final check that the dissolution is complete.

Post realisation profit/loss to capital accounts (PSR).
Repay external liabilities, then partners' loans.
Settle each partner's final capital with the remaining cash.
The bank account must balance to zero at the end.

Quick recap

Revaluation account: used when the partnership changes but continues; assets revalued, not sold.
Revaluation profit/loss shared among old partners in the OLD ratio.
Realisation account: used when the partnership is dissolved; assets sold, liabilities settled.
Realisation profit/loss shared in the profit-sharing ratio.
Decide which account by asking whether the business continues.
On dissolution, settle capitals with the available cash; the bank balances to zero.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

Revaluation = business CONTINUES (revalue, don't sell); profit/loss in the OLD ratio.
Realisation = business DISSOLVED (sell assets, settle debts); profit/loss in the PSR.
Revaluation: asset increase = credit, decrease = debit.
Dissolution order: external creditors → partners' loans → partners' capital.

How it’s examined

Tested on Paper 3: prepare a revaluation account on a change, or a realisation account and the closing of the books on dissolution (commonly [8-15] marks). Examiner reports note candidates confusing the two accounts, sharing revaluation profit in the new ratio, and failing to balance the bank account on dissolution.

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706 Paper 3 past papers & mark schemes, 2022-2024; 9706 Examiner Reports, 2022-2024. Last reviewed 2026-06-18.

Take this whole topic with you

Step-by-step worked examples — Revaluation and Realisation Account

Step-by-step solutions to past-paper-style questions on revaluation and realisation account, written exactly the way a tutor would explain them at the board.

Question type:

1Revaluation or realisation? (4 marks)
Getting startedIdentify & classify• 9706 Paper 3 style• revaluation, realisation, AO1
Question
State which account (revaluation or realisation) is used in each case: (a) a new partner is admitted; (b) the partnership closes down; (c) a partner retires and the firm continues; (d) the business is sold and wound up. (4 marks)
Step-by-step solution
1. Step 1
  (a) New partner admitted → revaluation (firm continues).
2. Step 2
  (b) Partnership closes down → realisation (dissolution).
3. Step 3
  (c) Partner retires, firm continues → revaluation.
4. Step 4
  (d) Business sold and wound up → realisation.
Answer
(a) revaluation; (b) realisation; (c) revaluation; (d) realisation.
Examiner tip
Continues → revaluation; ends → realisation.
2Prepare a revaluation account (6 marks)
Building confidenceMulti-step problem• revaluation, AO2
Question
On admitting a partner: premises increase $50,000; inventory decreases$ 6,000; a provision for doubtful debts of $4,000 is created. Old partners A and B share 3:2. Calculate the revaluation profit and each partner's share. (6 marks)
Step-by-step solution
1. Step 1
  Credits (increases): premises +50,000.
2. Step 2
  Debits (decreases): inventory 6,000 + provision 4,000 = 10,000.
3. Step 3
  Profit on revaluation = 50,000 − 10,000 = $40,000.
4. Step 4
  Share in OLD ratio 3:2: A = 40,000 × 3/5 = $24,000.
5. Step 5
  B = 40,000 × 2/5 = $16,000.
6. Step 6
  Credit A's and B's capital accounts with their shares.
Answer
Revaluation profit $40,000 (A$ 24,000; B $16,000).
Examiner tip
Increases credit, decreases debit; the balance (profit/loss) goes to old partners in the old ratio.
3Revaluation loss (4 marks)
Building confidenceMulti-step problem• revaluation, AO2
Question
On a change: machinery down $15,000; premises up$ 5,000. Partners X and Y share 1:1. Calculate the revaluation result and each partner's share. (4 marks)
Step-by-step solution
1. Step 1
  Decreases (Dr): machinery 15,000. Increases (Cr): premises 5,000.
2. Step 2
  Net = 5,000 − 15,000 = −$10,000 → a loss of $10,000.
3. Step 3
  Share 1:1: X −5,000; Y −5,000 (debited to capital accounts).
Answer
Revaluation loss $10,000 (X −$ 5,000; Y −$5,000).
Examiner tip
If debits exceed credits, the result is a loss, debited to the old partners.
4Transfer assets on dissolution (4 marks)
Building confidenceMulti-step problem• realisation, AO2
Question
On dissolution, the firm has: premises $80,000, inventory$ 12,000, trade receivables $9,000 (book values). Show how these enter the realisation account. (4 marks)
Step-by-step solution
1. Step 1
  Assets are transferred at book value: Dr Realisation, Cr each asset.
2. Step 2
  Dr Realisation with premises 80,000 + inventory 12,000 + receivables 9,000 = $101,000.
3. Step 3
  Cr Premises 80,000, Cr Inventory 12,000, Cr Trade receivables 9,000.
Answer
Dr Realisation $101,000; Cr the three assets at book value.
Examiner tip
Assets enter the realisation account at BOOK value on the debit side.
5Prepare a realisation account (7 marks)
StretchMulti-step problem• realisation, AO2
Question
Assets at book value $101,000 are transferred to realisation. They are sold for: premises$ 95,000, inventory $10,000, receivables collected$ 8,500. Dissolution costs $2,000. Partners share 2:1. Calculate the realisation profit/loss and each share. (7 marks)
Step-by-step solution
1. Step 1
  Dr side: assets 101,000 + dissolution costs 2,000 = 103,000.
2. Step 2
  Cr side (proceeds): 95,000 + 10,000 + 8,500 = 113,500.
3. Step 3
  Profit on realisation = 113,500 − 103,000 = $10,500.
4. Step 4
  Share 2:1 (total 3): first partner = 10,500 × 2/3 = $7,000.
5. Step 5
  Second partner = 10,500 × 1/3 = $3,500.
6. Step 6
  Credit the partners' capital accounts with their shares.
7. Step 7
  (Proceeds > book values + costs, so it is a profit.)
Answer
Realisation profit $10,500 (partners$ 7,000 and $3,500).
Examiner tip
Profit/loss = proceeds − (book values + costs); share in the PSR.
6Asset taken over by a partner (4 marks)
StretchMulti-step problem• realisation, AO2
Question
On dissolution, a partner takes over a vehicle (book value $7,000) at an agreed value of$ 6,000. Show the entry. (4 marks)
Step-by-step solution
1. Step 1
  The partner pays for the vehicle through their capital account, not cash.
2. Step 2
  Dr that partner's capital account $6,000 (the agreed value).
3. Step 3
  Cr Realisation $6,000 (proceeds to the realisation account).
4. Step 4
  The $1,000 shortfall vs book value forms part of the realisation loss, shared in the PSR.
Answer
Dr partner's capital $6,000; Cr Realisation$ 6,000.
Examiner tip
An asset taken over is credited to realisation at its agreed value and debited to the partner's capital.
7Settle liabilities at a discount (4 marks)
StretchMulti-step problem• realisation, AO2
Question
Trade payables of $20,000 are settled for$ 19,200 (a $800 discount received). Show the effect on the realisation account. (4 marks)
Step-by-step solution
1. Step 1
  Pay the payables: Dr Trade payables 20,000; Cr Bank 19,200.
2. Step 2
  The $800 saving (discount received) is a gain.
3. Step 3
  Cr Realisation $800 (or the payables are transferred to realisation and settled there).
4. Step 4
  This increases the realisation profit shared between the partners.
Answer
$800 discount received credited to realisation (increases the profit).
Examiner tip
Paying less than book value for liabilities is a gain to realisation.
8Complete the dissolution (6 marks)
StretchMulti-step problem• dissolution, AO2
Question
After realisation, capitals are A $50,000 (Cr) and B$ 20,000 (Cr); cash available is $70,000. There are no loans. Show how the dissolution is completed. (6 marks)
Step-by-step solution
1. Step 1
  External liabilities and any partners' loans are already settled.
2. Step 2
  Cash available $70,000 = total credit capital (50,000 + 20,000).
3. Step 3
  Pay A: Dr A's capital 50,000; Cr Bank 50,000.
4. Step 4
  Pay B: Dr B's capital 20,000; Cr Bank 20,000.
5. Step 5
  Both capital accounts close to nil.
6. Step 6
  The bank account balances to zero — the dissolution is complete. ✓
Answer
Pay A $50,000 and B$ 20,000; bank and capitals close to zero.
Examiner tip
Settle final capital balances with the available cash; the bank must end at zero.
9Order of payment on dissolution (3 marks)
StretchWord problem• dissolution, AO1
Question
State the order in which amounts are paid on the dissolution of a partnership. (3 marks)
Step-by-step solution
1. Step 1
  
  External creditors (trade payables, bank overdraft, etc.).
2. Step 2
  
  Partners' loans to the firm.
3. Step 3
  
  Partners' capital balances.
Answer
External creditors → partners' loans → partners' capital.
Examiner tip
Outsiders first, then partners' loans, then partners' capital.
10Garner v Murray (5 marks)
StretchWord problem• dissolution, AO3
Question
On dissolution, a partner's capital account ends in debit and they cannot pay. Explain how the Garner v Murray rule deals with this. (5 marks)
Step-by-step solution
1. Step 1
  A debit capital balance means the partner owes money to the firm.
2. Step 2
  If they are insolvent and cannot pay, the deficiency must be borne by the other (solvent) partners.
3. Step 3
  Under Garner v Murray, the solvent partners bear it in the ratio of their last agreed capital balances...
4. Step 4
  ...not in the profit-sharing ratio.
5. Step 5
  This shares the loss fairly according to capital, allowing the dissolution to be completed.
Answer
The solvent partners bear the insolvent partner's deficiency in the ratio of their last agreed capitals.
Examiner tip
Garner v Murray uses LAST AGREED CAPITALS, not the profit-sharing ratio.

Model Answers — Revaluation and Realisation Account

High-scoring sample answers for revaluation and realisation account on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 3 style4 marks
Q (4 marks). State whether a revaluation account or a realisation account is prepared in each case, and give a one-word reason: (a) admitting a partner; (b) winding up the business; (c) a partner retiring while the firm continues; (d) selling all the assets and closing.
Model answer
(a) Revaluation — continues. (b) Realisation — dissolution. (c) Revaluation — continues. (d) Realisation — dissolution.
Why this scores
Marking (point-based, 4). 1 mark each. The test is whether the business continues.
Question 2
9706 Paper 3 style6 marks
Q (6 marks). On admitting a partner: premises rise $60,000; fixtures fall$ 8,000; a provision for doubtful debts of $3,000 is created; inventory rises$ 1,000. Old partners P and Q share 2:1. Calculate the revaluation profit and each partner's share.
Model answer
Increases (Cr): premises 60,000 + inventory 1,000 = 61,000. Decreases (Dr): fixtures 8,000 + provision 3,000 = 11,000. Profit on revaluation = 61,000 − 11,000 = $50,000. Share (old 2:1): P = 50,000 × 2/3 = $33,333; Q = 50,000 × 1/3 = $16,667.
Why this scores
Marking (point-based, 6). Increases (1); decreases (1); profit $50,000 (2); split P/Q (2).
Question 3
9706 Paper 3 style4 marks
Q (4 marks). On a change: land falls $25,000, equipment falls$ 5,000 and a long-term liability is revalued down by $4,000. Partners R and S share 3:1. Calculate the revaluation result and each share.
Model answer
Decreases (Dr): land 25,000 + equipment 5,000 = 30,000. Increases (Cr): liability reduction 4,000. Net = 4,000 − 30,000 = −$26,000 (loss). Share (old 3:1): R = 26,000 × 3/4 = $19,500; S = 26,000 × 1/4 = $6,500 (both debited).
Why this scores
Marking (point-based, 4). Loss $26,000 (2); R$ 19,500 / S $6,500 (2). A liability reduction is a credit (gain).
Question 4
9706 Paper 3 style8 marks
Q (8 marks). On dissolution, assets at book value were: premises $120,000, inventory$ 18,000, receivables $14,000. Sold for: premises$ 135,000, inventory $15,000, receivables collected$ 13,200. Dissolution costs $3,000. Partners A and B share 3:2. Calculate the realisation profit/loss and each partner's share.
Model answer
Dr side: assets at book = 120,000 + 18,000 + 14,000 = 152,000; plus dissolution costs 3,000 = 155,000. Cr side (proceeds): 135,000 + 15,000 + 13,200 = 163,200. Profit on realisation = 163,200 − 155,000 = $8,200. Share (3:2): A = 8,200 × 3/5 = $4,920; B = 8,200 × 2/5 = $3,280.
Why this scores
Marking (point-based, 8). Book values (2); proceeds (2); costs (1); profit $8,200 (1); split A/B (2).
Question 5
9706 Paper 3 style4 marks
Q (4 marks). On dissolution, a partner agrees to take over inventory with a book value of $10,000 at an agreed value of$ 11,500. Show the double entry and state the effect on the realisation account.
Model answer
Dr the partner's capital account $11,500 (they pay through capital, not cash); Cr Realisation $11,500 (proceeds). As the agreed value ($11,500) exceeds the book value ($10,000), this adds $1,500 of profit to the realisation account, increasing the partners' shared profit.
Why this scores
Marking (point-based, 4). Dr capital $11,500 (1); Cr realisation$ 11,500 (2); effect — adds profit (1).
Question 6
9706 Paper 3 style6 marks
Q (6 marks). After the realisation account is closed, capital balances are C $60,000 (Cr), D$ 25,000 (Cr) and there is a partner's loan from C of $10,000. Cash available is$ 95,000. Show, in order, how the dissolution is completed.
Model answer
Order of payment: external creditors (already paid) → partners' loans → partners' capital.

Repay C's loan: Dr Loan from C 10,000; Cr Bank 10,000. Cash left = 95,000 − 10,000 = 85,000.

Repay capitals: C $60,000 and D $25,000 (total $85,000). Dr C's capital 60,000 / Cr Bank 60,000; Dr D's capital 25,000 / Cr Bank 25,000.

The bank account balances to zero (85,000 paid = 85,000 available) and all accounts close. ✓
Why this scores
Marking (point-based, 6). Loan repaid first (2); capitals C $60,000 / D$ 25,000 (2); bank zero / order correct (2).
Question 7
9706 Paper 3 style5 marks
Q (5 marks). Explain the difference between a revaluation account and a realisation account.
Model answer
A revaluation account is prepared when the partnership changes but continues (a partner joins, retires, or the ratio changes). Its purpose is to restate the assets and liabilities to fair value; the assets are not sold, and the resulting profit or loss is shared among the old partners in the old ratio.

A realisation account is prepared when the partnership is dissolved (wound up). Its purpose is to record the sale of the assets and the settlement of liabilities; the assets are actually disposed of, and the profit or loss on realisation is shared between the partners in the profit-sharing ratio. The key distinction is whether the business continues.
Why this scores
Marking (point-based, 5). Revaluation — continues/restate/old ratio (~2.5); realisation — dissolution/sell/PSR (~2.5).
Question 8
9706 Paper 3 style3 marks
Q (3 marks). State the order in which the proceeds of a dissolution are applied.
Model answer
External creditors (e.g. trade payables, bank overdraft). 2. Partners' loans to the firm. 3. Partners' capital balances. Outsiders are paid before the partners' own loans and capital.
Why this scores
Marking (point-based, 3). 1 mark each, in the correct order.
Question 9
9706 Paper 3 style6 marks
Q (6 marks). On dissolution, partner T's capital account shows a debit balance of $9,000 and T is insolvent and cannot pay. Explain how this deficiency is dealt with under the Garner v Murray rule, and why this is considered fair.
Model answer
A debit balance on T's capital account means T owes the firm $9,000. As T is insolvent, this amount cannot be recovered, so the deficiency must be borne by the remaining solvent partners.

Under the Garner v Murray rule, the solvent partners bear T's $9,000 deficiency in the ratio of their last agreed capital balances — not in the profit-sharing ratio. For example, if the solvent partners' last agreed capitals were $40,000 and $20,000 (2:1), they would absorb $6,000 and $3,000 respectively.

This is considered fair because the deficiency is a capital loss, so it is shared according to how much capital each partner had at risk, rather than how they shared trading profits.
Why this scores
Marking (point-based, 6). Debit = T owes / insolvent (~2); solvent partners bear it in last-agreed-capital ratio (~2); fairness — capital loss (~2).
Question 10
9706 Paper 3 style3 marks
Q (3 marks). State the entries to transfer a firm's assets to the realisation account on dissolution, and explain at what value they are transferred.
Model answer
The assets are transferred at their book (carrying) value: Dr Realisation account (with the total book value) and Cr each asset account. They are transferred at book value because any difference from the eventual sale proceeds becomes the profit or loss on realisation.
Why this scores
Marking (point-based, 3). Dr Realisation / Cr assets (2); at book value (1).

Key Definitions and Keywords — Revaluation and Realisation Account

Definitions to memorise and the exact keywords mark schemes credit for revaluation and realisation account answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Revaluation account
Examiner keyword
An account that restates assets/liabilities to fair value when the partnership changes but continues; its profit/loss goes to the old partners in the old ratio.
Realisation account
Examiner keyword
An account that records the sale of assets and settlement of liabilities when the partnership is dissolved.
Dissolution
Examiner keyword
The winding up of a partnership — assets are sold, liabilities settled and the partners' capitals repaid.
Profit/loss on revaluation
Examiner keyword
The net change in asset/liability values on a change, shared among the old partners in the old ratio.
Profit/loss on realisation
Examiner keyword
Sale proceeds − (book values + dissolution costs); shared between partners in the profit-sharing ratio.
Order of payment (dissolution)
Examiner keyword
External creditors first, then partners' loans, then partners' capital.
Garner v Murray rule
Examiner keyword
An insolvent partner's capital deficiency is borne by the solvent partners in the ratio of their last agreed capitals.

Common Mistakes and Misconceptions — Revaluation and Realisation Account

The traps other students keep falling into on revaluation and realisation account questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Confusing the revaluation and realisation accounts
9706 Examiner Reports
Why it happens
Both find a profit/loss on partner accounts.
How to avoid it
Revaluation = firm CONTINUES (assets not sold); realisation = firm DISSOLVED (assets sold).
✕Sharing revaluation profit in the new ratio
9706 Examiner Reports
Why it happens
Using the post-change ratio.
How to avoid it
Revaluation profit/loss belongs to the OLD partners — share it in the OLD ratio.
✕Transferring assets to realisation at a value other than book
9706 Examiner Reports
Why it happens
Using sale value on transfer.
How to avoid it
Transfer assets to realisation at BOOK value; record proceeds separately when they are sold.
✕Bank account not balancing to zero on dissolution
9706 Examiner Reports
Why it happens
Missing a receipt or payment.
How to avoid it
All cash in (proceeds, capital paid in) must equal all cash out — the bank must close at zero.
✕Paying partners before external creditors
9706 Examiner Reports
Why it happens
Ignoring the priority order.
How to avoid it
Pay external creditors first, then partners' loans, then partners' capital.
✕Sharing a Garner v Murray deficiency in the profit-sharing ratio
9706 Examiner Reports
Why it happens
Defaulting to the PSR.
How to avoid it
Garner v Murray shares the deficiency in the ratio of LAST AGREED CAPITALS, not the PSR.

Revaluation and Realisation Account

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Revaluation or realisation? (4 marks)

2Prepare a revaluation account (6 marks)

3Revaluation loss (4 marks)

4Transfer assets on dissolution (4 marks)

5Prepare a realisation account (7 marks)

6Asset taken over by a partner (4 marks)

7Settle liabilities at a discount (4 marks)

8Complete the dissolution (6 marks)

9Order of payment on dissolution (3 marks)

10Garner v Murray (5 marks)

Revaluation account

Realisation account

Dissolution

Profit/loss on revaluation

Profit/loss on realisation

Order of payment (dissolution)

Garner v Murray rule

✕Confusing the revaluation and realisation accounts

✕Sharing revaluation profit in the new ratio

✕Transferring assets to realisation at a value other than book

✕Bank account not balancing to zero on dissolution

✕Paying partners before external creditors

✕Sharing a Garner v Murray deficiency in the profit-sharing ratio