The following is the extract from the balance sheet of the firm with…

The following is the extract from the balance sheet of the firm with A, B and C as partners as on 31st March, 2025.

Creditors	Rs. 10,000
Machinery	Rs. 20,000
Stock	Rs. 12,000
Building	Rs. 55,000

C retired from the firm and the following are the adjustments related to revaluation :

i. Stock to be valued at 92% of its book value.

ii. Value of building is to be appreciated by 20%.

iii. Creditors of Rs. 2,000 are no longer payable.

Choose which of the following statements is true:

A. Stock A/c of Rs. 960 is to be shown on the debit side of the revaluation account.

B. Stock A/c of Rs. 960 is to be shown on the credit side of the revaluation account.

C. Creditors A/c of Rs. 2,000 is to be shown on the credit side of the revaluation account.

D. Creditors A/c of Rs. 2,000 is to be shown on the debit side of the revaluation account.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → A and C only

The Revaluation Account is credited with every gain (an increase in an asset or a decrease in a liability) and debited with every loss (a decrease in an asset or an increase in a liability).

The two items the statements speak of:

Stock revalued at 92% = 12,000 × 92/100 = Rs. 11,040
Fall in stock = 12,000 − 11,040 = Rs. 960, a loss
Creditors of Rs. 2,000 no longer payable = a liability reduced, a gain

A. Stock A/c of Rs. 960 is to be shown on the debit side of the revaluation account. Correct. The stock has fallen in value, and a decrease in an asset is a loss, so it is debited.

B. Stock A/c of Rs. 960 is to be shown on the credit side of the revaluation account. Incorrect. The credit side carries gains; a fall in the value of stock is not a gain.

C. Creditors A/c of Rs. 2,000 is to be shown on the credit side of the revaluation account. Correct. Creditors that need not be paid are a reduction in a liability, which is a gain and is credited.

D. Creditors A/c of Rs. 2,000 is to be shown on the debit side of the revaluation account. Incorrect. The debit side carries an increase in a liability; here the liability has gone down.

The 20% rise in the building is also a gain for the credit side, but no statement is about it.

NCERT (2026-27 edition):
Revaluation of Assets and Reassessment of Liabilities – “… For this purpose the firm has to prepare the Revaluation Account. The gain or loss on revaluation of each asset and liability is transferred to this account and finally its balance is transferred to the capital accounts of the old partners in their old profit sharing ratio. In other words, the revaluation account is credited with increase in the value of each asset and decrease in its liabilities because it is a gain and is debited with decrease in the value of assets and increase in its liabilities is debited to revaluation account because it is a loss. Similarly unrecorded assets are credited and unrecorded liabilities are debited to the revaluation account.”