What does a debit balance of the Revaluation Account indicate?

Correct answer: Revaluation loss

The governing rule is that the balance of the Revaluation Account represents the net result of changes in assets and liabilities. If the debit side exceeds the credit side, the account has a debit balance and the result is a revaluation loss. This loss is transferred to the capital accounts of the old partners in their old profit-sharing ratio. Therefore, option B is correct. A credit balance would indicate a revaluation profit, so option A reverses the accounting treatment. An unrecorded asset is only one possible item affecting the account and does not define a debit balance; cash profit is unrelated to this specific account.