Prepare the revaluation account, the partners' capital accounts and the statement of financial position after admission.

1. 1 · List each change in value. A gain or a loss for each asset and liability.
2. 2 · Prepare the revaluation account.
   • Debit: decreases in assets, new liabilities, new allowances.
   • Credit: increases in assets, decreases in liabilities.
   • Balance = profit or loss.
3. 3 · Share the balance. Old partners, in the old ratio.
4. 4 · Update the capital accounts. Opening balance + revaluation share (± any goodwill adjustment); the new partner's cash capital.
5. 5 · Prepare the new statement of financial position. Revalued assets, all liabilities, new capitals.
6. 6 · Check. Total assets = capitals + liabilities.

Scoring tip: Show each revalued figure with its working, e.g. inventory (400,000 − 40,000).