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Thank you for your last response, in relation to the last point did you mean that because there is a loss of 12,000 which is larger than the previous gain of 10,000 nothing goes into equity and the 2,000 loss difference just go through to the comprehensive income (p and l)?
Also from the F7 Notes Pg. 132
‘revaluation reserve transferred to retained earnings when asset sold, or …
… proportionately transferred to retained earnings throughout the asset’s remaining life’
Does this mean that whenever there is a revaluation surplus it’s always
Dr. Reval Surplus
Cr. Retained Earnings
eg. Reval surplus 30,000 would be debited to revaluation reserve and credited to retained earnings?I previously thought that it’s only if deprecation was to increase then that increment would be equal decrease in the revaluation reserve and increase in the retained earnings in order compensate for shareholders?
If depreciation decreased would this apply?
You really are confused!
The example that I made up in my previous post related to an asset that had previously been revalued and there was a surplus in the Revaluation Reserve (RR) relating to that asset of $10,000
Now that same asset has been reassessed and we should reduce its carrying value by $12,000
The double entry to effect that fall in value will be:
Dr RR $10,000
Dr (probably) Cost of Sales $2,000
Cr TNCA $12,000You say in your post:
“I previously thought that it’s only …..”
When we have an asset that has previously been revalued upwards and there is an amount within RR relating to that asset, and now we sell the asset, that amount in RR relating to the asset that is now sold represents a REALISED profit and, as such, is transferred to Retained Earnings through the statement of changes in equity
Is that any better for you?
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