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sir when historic cost depreciation is lower than the depreciation after revaluation, why should we transfer into retained earning?
for example, before revaluation dep= 2000
after =4000dr revaluation surplus 2000
cr retained earning 2000i did not understand the logic behind this entry?
Because why should retained earnings “suffer” an extra charge for depreciation just because e wanted to revalue the asset.
If depreciation had originally been $3,000 per annum (I’ve changed your figures) and now there’s $4,000 being charged to profits, that’s taking an extra $100,000 out of this year’s profits – where’s the logic in that?
However, you ask “why should we transfer into retained earning?”
We don’t – it’s only recommended – it’s not a requirement
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