Which item generally appears on credit side of revaluation account?

Correct answer: Decrease in liability

The correct answer is A: decrease in liability. Revaluation Account records the effect of changes in the values of assets and liabilities at the time of reconstitution. When a liability decreases, the firm’s obligation becomes smaller. This is a gain, and all gains are recorded on the credit side of Revaluation Account. Therefore, option A is correct. Option B, decrease in asset, lowers the firm’s asset value and is a loss, so it is recorded on the debit side. Option C, increase in liability, makes the firm’s obligation larger and is a loss, so it is debited. Option D, bad debts, represent the amount that may not be recovered from debtors; this reduces the value of assets and is a loss, so it is debited. The classification can be checked logically: anything that increases net value is a credit, while anything that reduces net value is a debit. A decrease in liability increases net value. Exam cue: in revaluation, liability down means gain and credit; liability up means loss and debit.