How do you account for revaluation surplus?



A revaluation surplus is an equity account in which is stored any upward changes in the value of capital assets. If a revalued asset is subsequently dispositioned out of a business, any remaining revaluation surplus is credited to the retained earnings account of the entity.

How do we treat revaluation surplus?

A revaluation loss should be charged to profit or loss. However the loss should be recognised in other comprehensive income and debited to the revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

What is the journal entry for revaluation surplus?

The company can make the revaluation of fixed assets journal entry by debiting the fixed asset account and crediting the revaluation surplus account. Revaluation surplus account is a reserve account in the equity section in which its normal balance is on the credit side.

How is a revaluation increase accounted for?





If the asset decreases in value, the revaluation reserve is credited on the balance sheet to decrease the carrying value of the asset, and the expense is debited to increase total revaluation expense.

What happens to revaluation surplus when asset is sold?

The revaluation surplus does not arise because of having sold the asset, it arose when the asset was previously revalued. When the asset is sold, the profit on sale is the difference between the cash received and the carrying value.

What is the journal entry for revaluation of assets?

Revaluation Reserve Journal Entries

Particulars Amount (Dr.) Amount (Cr.)
(Being increase in the value of assets on revaluation)
Revaluation A/c xxx
To Assets A/c (Individually) xxx
(Being decrease in the value of assets on revaluation)

What is revaluation surplus example?

Under revaluation model, management can revalue its assets to their current market value. If there is an increase in value of asset, the difference between asset’s market value and current book value is recorded as revaluation surplus. Example: A company purchased an asset two year ago at the cost of $ 100,000.

Where does revaluation surplus go on the balance sheet?





Revaluation Surplus Accounting Treatment



This surplus account is a reserve account that comes in the equity section of the balance sheet. Normally, the balance of this account is on the credit side. Fixed Asset Dr.

How do you reverse a revaluation surplus?

Reversal of revaluation



If a revalued asset is subsequently valued down due to impairment, the loss is first written off against any balance available in the revaluation surplus and if the loss exceeds the revaluation surplus balance of the same asset the difference is charged to income statement as impairment loss.

Is revaluation surplus part of shareholders equity?

If a fixed asset is revalued upwards, it increased the asset book value and also increases revaluation surplus, which is a shareholders’ equity component.

What is revaluation adjustment?

A revaluation is a calculated upward adjustment to a country’s official exchange rate relative to a chosen baseline, such as wage rates, the price of gold, or a foreign currency. In a fixed exchange rate regime, only a country’s government, such as its central bank, can change the official value of the currency.

Is asset revaluation surplus a reserve?

What is Revaluation Reserve? A revaluation reserve is a non-cash reserve created to reflect the true value of the asset when the market value of a certain category of asset is more or less than the value of such asset at which it is recorded in the books of account.



Where is revaluation gain recorded?

Revaluation gains are recognised in equity unless they reverse revaluation losses on the same asset that were previously recognised in the income statement. In these circumstances, the revaluation gain is recognised in the income statement.

What happens when an asset is revalued?

What is Assets Revaluation? Revaluation of Assets means a change in the market value of assets, increasing or decreasing. Generally, evaluations are carried out for an asset whenever there is a difference between the asset’s current market value and its value on the company’s balance sheet.

How do you deal with revaluation of assets?

How to Adjust the Depreciation of Revalued Assets

  1. Force the carrying amount of the asset to equal its newly-revalued amount by proportionally restating the amount of the accumulated depreciation; or.
  2. Eliminate the accumulated depreciation against the gross carrying amount of the newly-revalued asset.


Where does revaluation surplus go on the balance sheet?

Revaluation Surplus Accounting Treatment



This surplus account is a reserve account that comes in the equity section of the balance sheet. Normally, the balance of this account is on the credit side. Fixed Asset Dr.



How do you convert revaluation surplus to retained earnings?

If a fixed asset is derecognized, transfer any associated revaluation surplus to retained earnings. The amount of this surplus transferred to retained earnings is the difference between the depreciation based on the original cost of the asset and the depreciation based on the revalued carrying amount of the asset.

Is revaluation surplus part of shareholders equity?

If a fixed asset is revalued upwards, it increased the asset book value and also increases revaluation surplus, which is a shareholders’ equity component.

Is revaluation surplus part of other comprehensive income?

Revalued amount will be the fair value as on revaluation date less any subsequent accumulated depreciation and subsequent accumulated impairment loss When the asset is revalued the amount can be more or less than the carrying amount. Hence this gain or loss on revaluation will be included in Other Comprehensive Income.

Is revaluation profit or loss?

To put it in other words, the revaluation A/c is credited with the rise in the value of each asset and decrease in its liabilities; it is a profit and is debited with a decrease in the merit of assets and increase in its liabilities is debited to revaluation A/c, it is a loss.

What is the difference between impairment and revaluation surplus?

The major difference between the two is that a revaluation can be made upwards (to increase the value of the asset to market value) or downwards (to ecrease the value). An impairment, on the other hand, only refers to one of the two; a fall in the market value which is then written down.