where we post provident fund in revaluation acoount?
Provident Fund (or Employees Provident Fund) is a liability of a firm. There are usually three scenarios in respect of Provident Fund.
1. If there is an decrease in the balance of Provident Fund: If Provident Fund given on the Liabilities side of the Balance Sheet (of question) is say Rs 10,000 and the amount of Provident Fund given in the adjustment is say Rs 6,500; then there exists a fall in the value of the liabilities. Therefore, this fall is treated exactly in the manner that we do for other liabilities; that is showing the difference amount of Rs 3,500 (10,000 - 6,500) on the credit side of the Revaluation Account. Also, in the new balance sheet Provident Fund is appear with the new amount i.e. of Rs 6,500 on the Liabilities side.
2. If there is an increase in the balance of Provident Fund: In case, the amount of Provident Fund given in the adjustment is (say Rs 11,500) higher than what is given in the Balance Sheet (say Rs 10,000), then the rise of Rs 1,500 (11,500 - 10,000) is shown on the debit side of the Revaluation Account. This is exactly the same treatment for an increase in the liabilities' balance. Also, in the new balance sheet the Provident Fund is shown with the new amount i.e. of Rs 11,500 on the Liabilities side.
3. If the balance remains fixed: In case Provident Fund appears on the Liabilities side of the Balance Sheet (of the question) and no related adjustment is provided, then in such cases, we just show the balance of the Provident Fund on the Liabilities side of the New Balance Sheet as it is.
Note- It should be remembered that in no cases, Provident Fund is not transferred to the Partners' Capital Account.