• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

PPE

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › PPE

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 28, 2021 at 7:16 am #619028
    Anonymous
    Inactive
    • Topics: 6
    • Replies: 3
    • ☆

    Hello,

    My question is that what is the reason of transferring excess depreciation from revaluation surplus to retained earnings? Why companies do this? What is the benefit of doing it for a company while it is not compulsory?

    Thanks in advance.

    April 28, 2021 at 9:18 am #619044
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    As you will know from my free lectures, the revaluation reserve is a capital reserve and therefore cannot be distributed as dividend.

    Transferring the excess depreciation to retained earnings means it then does become distributable as dividend.

    It is only really relevant for companies if they do want to pay bigger dividends than they otherwise could. If they intend to pay lower dividends anyway then there is no point in making the transfer.

    April 28, 2021 at 9:50 am #619049
    Anonymous
    Inactive
    • Topics: 6
    • Replies: 3
    • ☆

    But how a company use this amount to pay as a dividend as it is not regonised as profit?

    I think revaluation surplus is just profit we can see in numbers not real cash actually in our hand until we sold it. Then if we don’t have any cash from revaluation surplus how it can be used as payemt for dividend?

    April 28, 2021 at 1:36 pm #619080
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Cash is needed to pay dividends and the cash will generate cash from all sorts of places – selling goods, disposing of assets etc..

    However by law the most they are allowed to pay out as dividend is the amount in retained earnings. By transferring the excess depreciation to retained earnings they are allowed to pay more dividend. That does not mean they will pay more dividend – that depends on how much cash they have available, it just means they are allowed by law to pay more.

    Have you watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • dkessilfie on FM Chapter 1 Questions – Financial management objectives
  • ahmadhoney on ACCA Advanced Audit and Assurance (AAA) The Audit Report 3: Types of Audit Report
  • Bimasha@123 on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)
  • Ken Garrett on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)
  • Bimasha@123 on Discounted Cash Flow Techniques – ACCA Advanced Performance Management (APM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in