At the time of retirement, if bad debts which were written off previously are now recovered, then where it is shown at the time of revaluation of assets?

Credit side of revaluation account

The correct answer is option 1: Credit side of revaluation account

Recovery of bad debts represents a gain for the firm, because an amount that was earlier treated as a loss is now received.

In revaluation:

• Gains are recorded on the credit side
• Losses are recorded on the debit side

Hence, recovered bad debts are treated as a profit on revaluation and shown on the credit side of the Revaluation Account.