Which item will appear on the credit side of Revaluation Account?

Correct answer: Decrease in liability

The correct answer is C: decrease in liability. A liability is an amount owed by the firm. If that liability decreases, the firm has to pay less, so the firm gains. Gains are credited in the Revaluation Account. Therefore, a decrease in liability appears on its credit side. Option C is correct. Option A, decrease in asset, reduces the firm’s value and is a loss, so it is debited. Option B, increase in liability, increases the firm’s obligation and is a loss, so it is debited. Option D, additional provision, creates or increases an expected liability or expense and is normally treated as a loss, so it is debited. The complete rule is useful: asset increase is credit, asset decrease is debit; liability decrease is credit, liability increase is debit. Do not judge only by the word ‘increase’ or ‘decrease’; first ask whether the change benefits or harms the firm. Memory cue: less liability means less burden, therefore credit.