- May 7, 2020 at 4:10 pm #570263AnonymousInactive
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Sir,I have a doubt. I dont know if its silly but its just for confirming..
Here if the asset is of the original cost was 3.6m whereas revalued amount was 3.072 so it was lesser than original cost thus it was credited to reduce the amount..
So if incase the revalued amount was higher than the original cost like suppose original cost is 3.6m after removing existing accumulated depreciation, whereas revalued amount is 3.8.. so what will be the effect? Wont the opposite happen? The difference amount of cost and reevalued will be debited as revaluation reserve below the balance of 3.6m in the cost account to increase thr amount right?
Please do help me confirm,im not really sure if I understood this well. Thankyou sir.May 8, 2020 at 10:47 am #570308John MoffatKeymaster
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You asked this question as a comment on the lecture also and I have answered your comment!
The surplus on revaluation is not the difference between the new valuation and the current carrying value (i.e. the original cost less the accumulated depreciation). It is not the difference between the new valuation and the original cost.
To achieve this, we change the balance in the cost account to the new valuation and we also remove the existing accumulated depreciation. So the new carrying value is the new valuation (which from then on we depreciate in the normal way).
In Paper FA the new valuation will always be more than the current carrying value.
I do suggest that you watch the lecture again and check all of the entries involved.
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