Explanation:

Let's break down the revaluation:

- Machinery Appreciation: 10% of Rs80,000 = Rs8,000 increase.

- Building Depreciation: 20% of Rs2,00,000 = Rs40,000 decrease.

- Unrecorded Debtors: Rs1,250 increase in assets.

- Creditor Adjustment: Rs2,750 decrease in liability (since it's a gain as payment is not needed).

Calculating Profit/Loss on Revaluation:

- Total Increase: Rs8,000 (machinery) + Rs1,250 (debtors) + Rs2,750 (creditor) = Rs12,000

- Total Decrease: Rs40,000 (building)

Net Result:

- Profit/Loss = Total Increase - Total Decrease = Rs12,000 - Rs40,000 = Loss Rs28,000.

- Option 1: Loss Rs28,000 (Correct Answer)

- Option 2: Loss Rs40,000

- Option 3: Profits Rs28,000

- Option 4: Profits Rs40,000