At the time of admission of a partner, an old asset is recorded in the books at ₹50,000. Its revalued amount is ₹62,000, and a separate provision of ₹7,000 is to be created for its repairs. What will be the net effect on the Revaluation Account?

Correct answer: ₹5,000 gain

The increase in the asset’s value from ₹50,000 to ₹62,000 creates a revaluation gain of ₹12,000. Creating a repair provision of ₹7,000 is a loss or charge against the Revaluation Account, so it must be deducted. Therefore, net gain = ₹12,000 − ₹7,000 = ₹5,000. ₹12,000 represents only the asset increase; the repair provision must also be considered.