Existing provision for doubtful debts is ₹18000 and new required provision is ₹12500. What will happen in revaluation account?

Correct answer: Credit ₹5500

The concept is that a provision is compared with the newly required amount when assets and liabilities are revalued. The existing provision is ₹18,000, whereas only ₹12,500 is required after revaluation. The provision therefore decreases by ₹18,000 − ₹12,500 = ₹5,500. A reduction in a liability or reduction in a provision releases an earlier charge and increases the firm’s net worth; it is consequently treated as a revaluation gain and credited to the Revaluation Account. A debit would be required if the new provision were higher than the old provision. The amount ₹12,500 is the closing provision, not the revaluation gain.