The journal entries recorded for revaluation of assets and reassessment of liabilities are given here, find the correct :
(A) For increase in the value of an asset
Asset A/c Dr.
To Revaluation A/c
(B) For reduction in the value of an asset
Revaluation A/c Dr.
Asset A/c
(C) For increase in the amount of a liability
Liability A/c Dr.
To Revaluation A/c
(D) For recording in the amount of a unrecorded liability
Revaluation A/c Dr.
To Liability A/c
Choose the correct answer from the options given below:
The journal entries recorded for revaluation of assets and reassessment of liabilities are given here, find the correct :
(A) For increase in the value of an asset
Asset A/c Dr.
To Revaluation A/c
(B) For reduction in the value of an asset
Revaluation A/c Dr.
Asset A/c
(C) For increase in the amount of a liability
Liability A/c Dr.
To Revaluation A/c
(D) For recording in the amount of a unrecorded liability
Revaluation A/c Dr.
To Liability A/c
Choose the correct answer from the options given below:
Solution
Looking at each journal entry for revaluation:
(A) Increase in asset value:
When an asset's value increases, it represents a gain. The asset account increases (debit) and Revaluation Account receives the gain (credit).
Asset A/c Dr. → To Revaluation A/c ✓
This is correct.
(B) Reduction in asset value:
When an asset's value decreases, it represents a loss. Revaluation Account bears the loss (debit) and asset account decreases (credit).
Revaluation A/c Dr. → Asset A/c ✓
This is correct.
(C) Increase in liability amount:
When a liability increases, it represents a loss for the business (more obligation). The entry shows:
- Liability A/c Dr. (which means liability is decreasing)
- To Revaluation A/c
This is treating increased liability as a gain, which is incorrect.
The correct entry should be: Revaluation A/c Dr. → To Liability A/c
Statement (C) is wrong.
(D) Recording unrecorded liability:
Recognizing a previously unrecorded liability is a loss. Revaluation Account bears the loss (debit) and liability is recognized (credit).
Revaluation A/c Dr. → To Liability A/c ✓
This is correct.
Statements (A), (B), and (D) are correct, while (C) is incorrect.
Correct Answer: Option 2