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Hello.
Regarding example one in chapter 3 (from open tuition course notes), the revaluation loss for the year amounted to 35000 when revaluation surplus relating to asset stood at 25000.Here are what my entries looked like in statement of changes in equity.
Reduce revaluation reserve by 25000.
Charge remaining loss of 10 000 to net profit for the year as impairment loss (as in other comprehensive income format)
Please explain why this wasn’t done in the answer.
Post this question again after you have read this response. I need to have easy access to the question and that’s inappropriate until this coming Friday
Well ummm i’am not sure but from net profit the whole amount 35000 should be deducted the equity entries are fine i believe….
Waleed, please stop answering questions in the Ask the tutor” section
Asma, please post your question again so that it’s the last post on this thread
Reposted:
Regarding example one in chapter 3 (from open tuition course notes), the revaluation loss for the year amounted to 35000 when revaluation surplus relating to asset stood at 25000.
Here are what my entries looked like in statement of changes in equity.
Reduce revaluation reserve by 25000.
Charge remaining loss of 10 000 to net profit for the year as impairment loss (as in other comprehensive income format)
Please explain why this wasn’t done in the answer.
Hi Asma, sorry for the delay
I still don’t have the question available, but from memory here’s my best shot!
Doesn’t the question say something like “During the year the following things have happened:” and then it lists four or five matters one of which is the writing down of the asset by 35,000.
That write-down has already been accounted for in the accounting records so the extra 10,000 is already deducted in arriving at the year’s results
Ok?
Ah.. so the profit already contains the impairment loss. That clears it up. Had it been last year*s profit n loss extract then i guess we’d be treating it as I did above.
Just so I understand the double entry for this loss goes something like this
Dr rev reserve 25000
Dr impairment loss 10000
Cr asset 35000Is that right?
Agreed – and if the question had said “the impairment loss has not yet been accounted for” or “at the end of the year the directors decided to impair the asset and this is not reflected in the above figures” then your answer would have been correct
(the second debit would be to the statement of profit or loss)
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