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When we calculating cash payment for PPE this year, under PPE T account, left side revaluations +8 means for what? I can know total deprn is 57,deprn based on historical cost is 49, so difference is 8. But I cant understand why add to PPE debit side? Thanks
You are given financial statements and not the draft statement. suppose say, if you were given a draft statement then you are supposed to find depreciation and then deduct it. here, you are given financial statement so this depreciation is already deducted. Now, coming to depreciation values. it says, 57 is the total depreciation of the PPE, but only 49 is of historical cost then the rest 8 (57-49) is deducted to revaluation reserve and added to retained earnings.
152 is given in the FS as revaluation reserve and before depreciatio it would be 152 +8=160. 60 is the previous year RR then revaluation of the year is 160 -60=100.when there is gain in Revaluation you debit in PPE and if a loss you credit in PPE. depreciation is always on credit side. addititons always on debit side. disposals on credit.
for adding , debit.
for deduction, it is credit side in PPE.
another way to think,
debit value in asset, expense is addition.
credit value in asset expense is deduction.happy to see you here again!!! 🙂
depreciation is always on credit side—-YES!
then the rest 8 (57-49) is deducted to revaluation reserve and added to retained earnings. —-still cant knowyou have studied this in F2.
if an asset is revalued, then they may transfer the additional depreciation from RR to RE.
depreciation is always done after making draft statements.
so you get net values in draft statements and then they do depreciation calculations. it is given 8 is the additional depreciation transfered.I still cant understand additional depreciation transfered. What’s it? for example:
A PPE cost 6, deprn 1,NBV5, fair value is 10, then new deprn under F.V. is 3 this year.
So, additional depre is 3 or 3-1=2?I think should be 3? Additional deprn is the F.V. PPE’s new deprn this year. If in PPE, why transferred to RE?? Why not directly credit side of PPE?
Additional dprn should be 2.
Actually you have studied this in f2. you should have referred f2 text.
eg.
cost $50,000 and its useful life 10 years. if following straight line depr’n. depreciation value is $5,000. it will be same for all 10 years. now, after 3 yrs it was revalued to $52,000. no change in useful life. so 7 years is useful life. new depreciation charge will be $6000. so transfer this 1000 from RR to RE. now what is RR here? RR is 17,000. after transfer it would be 16,000.
hope it helps…actually, some they dont transfer and others they transfer. this is not mandatory. possible reason for this transfer is they want to depreciate only based on historical cost to be charged on IS, profit calculations and the rest charged to RR(equity).
So you mean Dickson’s way is transferring extra deprn that is the net or difference of the new deprn under F.V. and C.V.’s deprn before revaluation to RE’s debit side.
Here we want to know or return the step for F.V. of this PPE!!! Thanks, I think I can understand. I have left F7 for a long time, still recalling some points…152 is given in the FS as revaluation reserve and before depreciation it would be 152 +8=160. 60 is the previous year RR then revaluation of the year is 160 -60=100.
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