Old creditors were ₹1,20,000 and after settlement the liability remains ₹1,08,000. What happens in Revaluation Account?

Correct answer: ₹12,000 लाभ

The governing principle is that a reduction in an existing liability creates a gain for the partnership. Creditors originally stood at ₹1,20,000, but the amount finally payable is only ₹1,08,000. The liability has therefore decreased by ₹1,20,000 − ₹1,08,000 = ₹12,000. This saving benefits the firm, so Revaluation Account is credited by ₹12,000, while Creditors Account is debited to reduce the liability. Option B is correct. Option A reverses the nature of the adjustment, option C treats the remaining liability as the gain instead of the reduction, and option D ignores a definite change in the firm’s obligation.