Revaluation Account vs Realisation Account: The Complete Guide

In Class 12 Accountancy, students often mix up Revaluation A/c and Realisation A/c. While they sound similar, using the wrong one in a Board Exam question (e.g., preparing a Revaluation A/c during Dissolution) leads to zero marks.

This guide breaks down exactly when to open which account and the logic behind them.

The Core Concept: When to use which?

1. Revaluation Account (The “Update” Account)

• When: Opened during the Reconstitution of a firm (Admission, Retirement, or Death of a partner).
• Purpose: To update the book value of assets and liabilities to their current market value. The firm continues to exist; only the relationship between partners changes.

2. Realisation Account (The “Closing” Account)

• When: Opened during the Dissolution of a firm.
• Purpose: To sell (realise) all assets and pay off all liabilities. The firm is shutting down forever.

Top 5 Differences Table

Basis	Revaluation Account	Realisation Account
Time of Preparation	At the time of Admission/Retirement/Death.	At the time of closing the business (Dissolution).
Objective	To adjust values of assets/liabilities.	To sell assets and settle liabilities.
Result	Profit/Loss goes to Old Partners in Old Ratio.	Profit/Loss goes to All Partners in Profit Sharing Ratio.
Book Value vs Market Value	Records only the difference (increase/decrease).	Records the full book value first, then the sale value.
Frequency	Can be prepared multiple times in a firm’s life.	Prepared only once in a firm’s lifetime.

Journal Entry Logic

For Unrecorded Assets

• In Revaluation: Unrecorded Asset A/c ...Dr To Revaluation A/c (Reason: We are bringing the asset into the books).
• In Realisation: Bank A/c ...Dr To Realisation A/c (Reason: We sold the unrecorded asset directly for cash. We don’t open an asset account first).

[Conclusion] Next time you see a question, check the first line: Is the partner retiring (Revaluation) or is the firm closing (Realisation)? This small check saves big marks. For practice questions on Dissolution, check our Class 12 Accountancy Question Bank.