Revaluation + Depreciation Help needed please (confused)

Hi Lizzie, Of a truth, It can be confusing but i will take you through it.
The best way to understand it is to prepare two column, one for historic cost as though the asset is never revalued and one for revalued cost as below

PPE HCost Revaln Revaln Res
20×6 cost 10000 10000
20×8 acc depn (4000) (4000)
CV 6000 6000
Revaluation 12000 6000
Depn (2000) 12/3 (4000) (2000)Excess depn
Since the revaluation was credited to Rev Reserve, subsequent depn will not be charged completely to i/s since part of the gain on the increase is in reserve, so RR will be debited with 2k and credited to Retained Earning.

Sorry, i couldnt get it to align but i hope u can make some sense out of it, otherwise let me know

Hi, Sorry, i know you might not understand as the column went out of sync, i will try and explain,
The initial cost was 10k depreciated over 5 yrs uel, so at 20X8, 2 yrs depn must have been charged leaving the asset at the NBV of 6K ( 10-4(2yrs charges).
Assets then revalued to 12K giving rise to 6k of revaluation increase. i.e 12- 6(nbv) which is then taken to reserve. Hence the answer you have Dr Asset 6k(i.e increase the asset to 12K) and cr Reserve 6K ( revaluation).
After the revaluation, the asset will still need to be depreciated over the remaining 3 yrs useful life on a straight line, hence the depn charge now becomes 4k per annum (12/3) as against 2k per annum( original depn charge before revaluation.
Since the revaluation amount of 6k has now been taken to reserve, so the excess charge over the usual depn of 2k will go against reserve that enjoys the benefit of the increase in asset value.
therefore only 2k of the new depn charge goes against income statement with the excess going agaist reserve. hence the answer Dr Reserve, Credit R/E.
with 2k excess of the depn charges.
I hope u understand, feel free to contact me if still confused

Hi Temi,
Thank you for your clear explaination, but I don’t really get the entry:
Dr Reserve – 2k
Cr RE – 2k
I thought the depreciation of 4k would be accounted as follows:
Dr RE – 2k
Dr Reserve – 2k
Cr Accumulation depreciation 4k

@vivian1642006 said:
Hi Temi,
Thank you for your clear explaination, but I don’t really get the entry:
Dr Reserve – 2k
Cr RE – 2k

The reason for this adjustment maybe for the reversal entry of the excess depreciation that have been charged to the Profit or Loss. For doing the console financial statement, the simple adjustment that we will make is juz reversal the wrong accounting transaction instead of eliminate the previous double entry and do it correct way.