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sir I did not understand the journal entry for revaluation increase and decrease.
example. land book value is 13000 . two years ago a slump in land values led to reduce CV from 15000. now, land worth 20000.
I did journal entry as
dr ppe 7000
cr revaluation surplus 7000but the correct entry was
dr PPE 7000
cr p/l 2000
cr revaluation surplus 5000
sir I did not understand how these values are adjusted in journal entryWhere we have a revaluation increase, that increase shall be credited to a revaluation reserve EXCEPT where there has been a previous revaluation decrease.
When that decrease was accounted for, the double entry would have been:
Dr profit or loss 2,000
Cr PPE 2,000Now, on the event of a subsequent reversal and a revaluation increase, the first 2,000 will go to profit or loss to reverse the first entry and only the remaining 5,000 will go to a revaluation reserve.
NB The question has specified land as the affected asset because we don’t charge depreciation on land. Had this been an item of plant or a building, we will have been charging depreciation. On the revaluation of such an asset that reverses a previous impairment, we cannot reverse the profit or loss debit by an amount greater than is necessary to bring the asset back to the value it would have been if we had not impaired it in the first place
Clear?
I am sorry sir but I could not understand which figures to deal first and which figures then to make reversal entry. sir can you pls show me journal entry before reversing and after reversing and combined one. I could not get you properly 🙁
One step at a time SJ 🙂
Here’s the impairment.
Dr Profit or loss 2,000
Cr Asset 2,000Tell me you’re happy with that and we’ll move on
Ok, step 2, revalue
At the moment we have a carrying value of 13,000 and we wish to increase that to 20,000
Historically we impaired the land by 2,000 with that amount being charged against profits.
So, now when we revalue by 7,000, the first 2,000 of that 7,000 must go to statement of profit or loss to reverse that 2,000 impairment
That leaves us with 5,000 to credit to a revaluation reserve
So the complete double entry for that revaluation is:
Dr Land Account 7,000
Cr statement of profit or loss 2,000
Cr revaluation reserve 5,000OK now?
when asset is revalued at year end,dep is charged on WDV previously to revalued amount.The revaluation surplus should be recorded after deducting dep charge for the year from WDV.The difference of WDV (After net-off with dep charge) and revaluation should be charged to revaluation reserve kindly guide the entry of below given E.g.
E.g
asset revalued on 30 June 2004 (year end)
Revalued amount 12000
there is no revaluation loss.
Dep Rate 10%
Asset cost 15000
Asset WDV 10935
Acc Dep 4065When was the accumulated depreciation 4,065? Was it on 1 July, 2003 or on 30 June, 2004?
sir I got stuck in where we have to put revaluation amount in financial statements. we have profit of 500000.
land,
y1 1,000,000
Y2 1,100,000
Y3 1,050,000
so P/L and OCI for 2nd year and 3rd year2nd year
profit 500,000
OCI 100,000
total 600000for the 3rd year,
1.what value should we keep as profit? I mean 500,000 itself or after deducting 50000 loss on revaluation from profit.2nd. I could not do equity section of SOFP in both years. sir and if it is possible , can you please give me explanation too while answering my 2nd question.
Sasha, I’m really sorry but I simply do not understand the question 🙁
Can you please let me have a reference number where I can find the original and see the numbers for myself? Exam date? Question name? Anything to help me find the question!
sorry sir. I will try to make you clear.
let’s assume we are given profit 500,000 and other comprehensive income (OCI)= 0
in question it is given the land value as,
Y1=1,000,000
Y2=1100,000
Y3= 1,050,000my 1st question is I could not do the equity section for both 2nd and 3rd year. and 2nd question is while calculating profit for 3rd year, loss on revaluation is deducted from profit itself in P/L account or it is deducted in OCI?
and I could not do the journal entry for this question.
dr Asset 100,000
cr revaluation surplus 100000sir now we have to reverse this entry right? earlier we have credit surplus 100000 and later debit surplus 50000. so we need to reverse earlier 100000 first. but i could not make the journal entry from here 🙁
Year 2 Dr Asset 100,000 Cr Revaluation Reserve 100,000
Year 3 Dr Revaluation Reserve 50,000 Cr Asset 50,000
That’s it, I believe
Year 3 Dr Revaluation Reserve 50,000 Cr Asset 50,000
as I already typed in the previous post! That entry reverses part of the previous one
Both the year 2 credit to revaluation reserve and the year 3 debit to revaluation reserve will also be credited and debited respectively in the statement of other comprehensive income
You can’t do a single journal entry for years 1, 2 and 3
I’ve given you the single journal entry for year 2 and the one for year 3 (there isn’t one for year 1)
sir does loss on revaluation means DR revaluation surplus ? and gain on revaluation means cr revaluation surplus. I am confused with these terms. in questions i get confused whether the amount is kept under the heading loss/gain on revaluation or revaluation surplus/reserve.
sir can you pls check my answers below. this is what I have been struggling for few days
back.Q1. original cost (OC) of land =15000
revalued upto in 2nd yr = 20000
3rd year =17000
so journal entry for this is
Dr revaluation surplus 5000
dr loss on revaluation 2000
Cr asset 7000we will take 5000 in SOCIE and in comprehensive income . and debited 2000 in P/l account.sir am I correct?
2.in the same way when original cost is 15000 and revaluation amounts are 13000 and 20000 respectively, journal entry is
drAsset 7000
cr revaluation surplus 5000
gain on revaluation 2000here we will take 5000 in SOCIE and OCI and again credit 2000 in P/l account.
3rd question.
original cost = 15000
2nd year =25000
3rd year=23000sir can you help with journal entry and the amount that goes into equity, OCI and in P/l?
I am exempted from F3 so I don’t know even the simplest concepts. I am sorry for asking repeatedly same questions .
“Gain” suggests the movement in a single year whereas “surplus” suggests the accumulated amount (though I’ve never had to think or write that ever before in my life!)
“Q1. original cost (OC) of land =15000
revalued upto in 2nd yr = 20000
3rd year =17000
so journal entry for this is
Dr revaluation surplus 5000
dr loss on revaluation 2000
Cr asset 7000”Year 2 – Dr Asset 5,000 Cr Revaluation Reserve 5,000
Year 3 – Dr Revaluation Reserve 3,000 Cr Asset 3,000“we will take 5000 in SOCIE and in comprehensive income . and debited 2000 in P/l account.sir am I correct?” – No, you’re not correct. In year 2 we will show the gain in Other Comprehensive Income and in Statement of Changes in Equity but nowhere is there an entry into Statement of Profit or Loss
“2.in the same way when original cost is 15000 and revaluation amounts are 13000 and 20000 respectively, journal entry is
drAsset 7000
cr revaluation surplus 5000
gain on revaluation 2000here we will take 5000 in SOCIE and OCI and again credit 2000 in P/l account.”
No – it’s really time that you went to the F3 videos and learned about debits and credits!
Year 2 Dr Profit or Loss 2,000 Cr Asset 2,000
Year 3 Cr Profit or Loss 2,000 Cr Revaluation Reserve 5,000 Dr Asset 7,000“3rd question.
original cost = 15000
2nd year =25000
3rd year=23000”Year 2 Dr Asset 10,000 Cr Revaluation Reserve 10,000
Year 3 Dr Revaluation Reserve 2,000 Cr Asset 2,000Anything going through Revaluation Reserve will also go through Other Comprehensive Income
Now for the really important part of your post …..
“I am exempted from F3 so I don’t know even the simplest concepts. I am sorry for asking repeatedly same questions”
SO HOW ON EARTH DID YOU GET EXEMPTED? THE IDEA OF AN EXEMPTION IS THAT YOU DON’T HAVE TO GO THROUGH AGAIN STUFF THAT YOU LEARNED AT UNIVERSITY
Seriously, go and spend some time (it’s an investment for the future) following John’s F3 lectures and course notes
I have been off from my studies for many years so i am struggling even for these simple concepts.
1.Year 2 – Dr Asset 5,000 Cr Revaluation Reserve 5,000
Year 3 – Dr Revaluation Reserve 3,000 Cr Asset 3,000“we will take 5000 in SOCIE and in comprehensive income . and debited 2000 in P/l account.sir am I correct?” – No, you’re not correct. In year 2 we will show the gain in Other Comprehensive Income and in Statement of Changes in Equity but nowhere is there an entry into Statement of Profit or Loss.
so in year 3, where do we take 3000? it is loss on revaluation. so we deduct 3000 in other comprehensive income from 5000 and SOCIE , am i correct?
“3rd question.
original cost = 15000
2nd year =25000
3rd year=23000”Year 2 Dr Asset 10,000 Cr Revaluation Reserve 10,000
Year 3 Dr Revaluation Reserve 2,000 Cr Asset 2,000
don’t we have combined journal entry for this question like we have in 1st question?And yes thank you for answering my questions.
Sasha, what on earth are you talking about? “don’t we have combined journal entry for this question like we have in 1st question?”
What do you mean, a combined journal entry?
I’ve given you the precise journal entries for the end of year 2 and the end of year 3 for your three examples. Why are you trying to change them?
Q1. original cost (OC) of land =15000
revalued upto in 2nd yr = 20000
3rd year =17000
so journal entry for this is
Dr revaluation surplus 5000
dr loss on revaluation 2000
Cr asset 7000”3rd question.
original cost = 15000
2nd year =25000
3rd year=23000”… I was trying to say journal entry like above.
year 2 and year 3 journal entry is clear for me.no problem. I was asking do we need to make journal entry like above for this question also.Sasha, I despair!
My post timed at 6.57am today said:
“Year 2 – Dr Asset 5,000 Cr Revaluation Reserve 5,000
Year 3 – Dr Revaluation Reserve 3,000 Cr Asset 3,000”THOSE ARE THE JOURNAL ENTRIES for question 1
Please, stop trying to change them!
Your comment in this most recent post from you ….
“so journal entry for this is
Dr revaluation surplus 5000
dr loss on revaluation 2000
Cr asset 7000”…. is total nonsense. This is not even F3 level …. you’re sinking to the level of GCSE (and lower!)
The journal entries for the third example are as I have already posted! But here they are again ….
Year 2 Dr Asset 10,000 Cr Revaluation Reserve 10,000
Year 3 Dr Revaluation Reserve 2,000 Cr Asset 2,000Now Sasha please, please, please stop trying to change these journal entries that I’m giving you!
Every time you start a post with “So ……… ” and finish with “Am I correct?” the answer is “NO, you’re not correct unless you have copied and pasted the journal entries that I keep telling you”
Go to F3! Make a point of it! Just do it! And recommend to all your friends NOT to take advantage of any exemptions from the F2 and F3 papers.
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