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Hi
what is the use of General Reserve account?
When an asset has been impaired can we charge the impaired loss to general reserve before taking the balance to profit or loss statement?
Hi . General reserve is referred to as the reserve fund that is created by keeping aside a part of profit earned by the business during the course of an accounting period. In this case revaluation gains.
If an asset is impaired we can charge the impairment loss to general reserve but only up to the value that the revaluation gains have at the time of the impairment.
hi Sir,
thank you so much for teaching us i just have one question, why did we deduct 325 as impairment ( OCI ) ? we already used that from the surplus which cancels it off and remaining 50 as impairment why did we deduct 325 from OCI?
325 was already in OCI from previous revaluation and subsequent transfer of excess depreciation, at the start of year 20×7, so to net it off at the end of year we first set of 325 of Impairment to OCI and remaining to SPL
okay thanks
i didnt know oci carrys balance as well because i thought even oci is yearly basis
I like the slogan stick to that and you wont go too far wrong )
Sir , should we not first transfer 375 from ppe to impairment and then from impairment to sopl and oci
Hi
Can we not show Impairment at Nil in Other comprehensive income as we had 325 income and Loss of 325 in current year.
Will this be incorrect representation
I don’t think it would be a mistake, but showing Nil could gain some marks. It would show the reviewer that you understand that OCI was some number before, and after entries there’s nothing left.
Hi Cris,
What is the difference between impairment and revaluation downwards?
Please explain.
Thank you.
In this case, basically none to my opinion. If it was not stated that they did impairment review, if they just did year-end revaluation and got 600,000, we would do everything the same
Hi,
Why we didn’t put on SFP revaluation surplus?
What exactly? There’s a lot going on here and many accounting entries
Hello
Just to be sure … so here the « revaluation surplus » will be 0 right ?
Thanks
Hi! Yes, exactly
From where that 50 came in depreciation?
it is the depreciation amount that would have been charged had the asset had not been revalued.
depreciation= 1000/20
50 per annum
Sir, could you please upload a video on ‘Reversal of Impairment’ as well?
Do we have to transfer excess depreciation to retained earnings every year?
We aren’t obliged to do so but it is best practice.
The depreciation charge for the year that was recorded in the Statement of Profit or Loss for the year ended 31st Dec 20×7 should have been 50,000 rather than 75,000. The company wishes to transfer the excess depreciation charge to retained earnings directly from the revaluation surplus reserve.
Entries would be:
Dr Acc depreciation (SFP) 75,000
Cr Depreciation charge (SPL) 75,000
Dr Revaluation Surplus (SFP OCI) 25,000
Cr Retained Earnings (SFP) 25,000
The sentence below wasn’t use in the solution:
The company opts to transfer any excess depreciation on the revalued amount to retained earnings.
I think the 25, 25 excess will not be charged from the surplus. Pls I need more light on that.
Thank you
It’s an optional transfer but generally considered to be ‘best practice’
OK?
Nice explanation .Thank you.