For reduction in the value of an asset, correct journal entry will be:

The correct answer is Option (4) → Revaluation A/c Dr., To Asset A/c

A fall in the value of an asset is a loss on revaluation, and losses are debited to the Revaluation Account. The asset account is credited, because its book value comes down by that amount.

Option (1) is the entry for an increase in the value of an asset: the gain is credited to the Revaluation Account. The partners’ capital accounts are charged only later, with the net loss on revaluation, not asset by asset.