If the existing provision is ₹10,000 and the newly required provision is ₹7,000, what will be the effect in the Revaluation Account?

Correct answer: Credit ₹3,000

The governing concept is that a reduction in an existing provision creates a gain during revaluation because the liability or charge against the firm becomes smaller. The provision falls from ₹10,000 to ₹7,000, so the reduction is ₹10,000 − ₹7,000 = ₹3,000. This benefit is credited to the Revaluation Account. Option A is therefore correct. Option B would apply if the required provision increased by ₹3,000. Option C incorrectly treats the new total provision as the adjustment, and option D is wrong because the difference must be recorded. The amount, not the remaining provision, is the relevant adjustment.