On retirement or death of a partner, assets and liabilities are to be shown at old values for which account to be opened is:

Question

Accepted Answer

The correct option is 3:
The Memorandum Revaluation Account is the correct choice because it is the only accounting mechanism that achieves the specified dual objective: calculating the exact profit or loss on revaluation for distribution among all partners (including the retiring or deceased partner) *without* changing the historical cost figures in the books of the firm. This account is prepared in two parts; the first part records the gains and losses from revaluation, and the resulting net profit or loss is distributed to all partners in their old profit-sharing ratio. The second part of the account is a direct reversal of the first, which systematically nullifies the effect of the revaluation entries in the ledger, thereby ensuring that the assets and liabilities continue to appear in the Balance Sheet at their *old* or original book values, exactly as the question requires.

The incorrect options are 1, 2, and 4:
The standard Revaluation Account (Option 2) is incorrect because its fundamental purpose is to record the change in value of assets and liabilities and update the Balance Sheet with the *new*, revised figures. If this account were used, the old values would be replaced, which directly violates the condition given in the question. The Profit & Loss Account (Option 1) is a periodic statement that summarises the operating results of the business, focusing on normal revenues and expenses. It is not the designated or appropriate account for recording the non-recurring capital event of asset and liability revaluation upon partnership reconstitution. The Realisation Account (Option 4) is entirely irrelevant in this context as it is exclusively prepared when the entire partnership is **dissolved** and the business is shut down, with assets being sold off and liabilities being settled. Retirement or death is a reconstitution of the firm, not a dissolution, meaning the business continues to operate.