The book value of an old plant is reduced from ₹3,60,000 to ₹3,18,500. What is the correct effect on the Revaluation Account?

Correct answer: ₹41,500 debit

Decrease in plant value = ₹3,60,000 − ₹3,18,500 = ₹41,500. A reduction in the value of an asset is a revaluation loss, so ₹41,500 is debited to the Revaluation Account. Crediting ₹41,500 would be incorrect because a credit represents a revaluation gain arising from an increase in asset value. Exam tip: record the decrease in the asset on the credit side of the Revaluation Account, while the resulting loss is debited to that account.