At the time of reconstitution, which of the following items is recorded as a loss in the Revaluation Account?

Correct answer: Decrease in asset

A decrease in the value of an asset reduces the firm’s net assets, so it is recorded on the debit side of the Revaluation Account as a loss. In contrast, an unrecorded asset and a decrease in liability generally produce a gain and are credited. Exam tip: debit decreases in assets and increases in liabilities; credit increases in assets and decreases in liabilities.