If prepaid insurance of ₹3000 is found as an unrecorded asset then what happens in Revaluation Account?

Correct answer: ₹3000 credit

An unrecorded prepaid insurance balance is an asset belonging to the firm. When it is discovered during reconstitution, the firm obtains an economic benefit that was not previously shown in the books. The asset is therefore recognized at its stated amount of ₹3,000, and the corresponding credit is made to the Revaluation Account because the discovery produces a revaluation gain. A debit would be appropriate for a reduction in an asset, not for a newly identified asset. No entry is incorrect because the item must be brought into the books, while a capital debit would not show the nature or source of this adjustment.