Why Losses in Debit Side of Revaluation Account and incomes in credit side of revolution account.

When a new partner comes, we need to prepare revolution account.

1.  This account is prepared to transfer the profit or loss from business to old partner before firm's reconstruction. So, all losses will debit in this account and All incomes will credit in this account.If incomes more than losses, net profit will transfer to old partner in their profit and loss sharing ratio. 

2. If we will debit all losses, and credit all incomes in this account, it will easy for us to compare and reach net loss or profit. 

3. Losses (Debit Side):

When there is a loss on the revaluation of assets or liabilities, it represents a decrease in the overall value of the business. To record this decrease, the loss is debited to the Revaluation Account. This aligns with the general rule that increases in expenses and losses are recorded on the debit side.

Incomes (Credit Side):

Conversely, when there is a revaluation that results in an increase in the value of assets or a decrease in liabilities, it represents a positive impact on the business. This increase is credited to the Revaluation Account. Incomes and gains are typically recorded on the credit side in accounting.

The convention helps maintain the accounting equation:

Assets=Liabilities+Equity

By recording losses on the debit side and incomes on the credit side, the equality of debits and credits is maintained, ensuring accurate financial reporting and adherence to accounting principles. It's a standardized approach that facilitates consistency and clarity in financial statements.

Revaluation account

Dr. side

To Asset ( decrease in the amount of certain asset )

To Liabilities ( increase in the amount of any certain liabilities )

To Liabilities ( if any liability have but not recorded in books )

To transfer of profit to partner in old ratio

(if credit side is more than debit side )

Cr. Side

By Asset ( increase in the amount of certain asset )

By Liabilities ( Decrease in the amount of any certain liabilities )

By Asset ( if any asset have but not recorded in books )

By transfer of profit to partner in old ratio

(if debit side is more than credit side )