Revaluation Reserve
Rakesh Kalyani (124 Points)
28 March 2019
what is revaluation Reserve?why is it current liability?plz explain me with example
4 Replies
Giridhar S Karandikar
(Team Lead)
(7553 Points)
Replied 28 March 2019
reserve created on revaluation of fixed assets us termed as. revaluation reserve.
entity's having large number of assets are required to carry on revaluation of their assets at regular intervals to understand if the assets. are working properly. so if it is found after revaluation that the life of the assets stands to increase then the current value then the assets are stated at the revalued value in the BS and excess is credited to revaluation reserve.
it is to be shown under the head Reserves and surplus and not current liability
entity's having large number of assets are required to carry on revaluation of their assets at regular intervals to understand if the assets. are working properly. so if it is found after revaluation that the life of the assets stands to increase then the current value then the assets are stated at the revalued value in the BS and excess is credited to revaluation reserve.
it is to be shown under the head Reserves and surplus and not current liability
Rakesh Kalyani
(124 Points)
Replied 28 March 2019
sir plz give one example so that i can get more clarity on this.
Giridhar S Karandikar
(Team Lead)
(7553 Points)
Replied 28 March 2019
building value @ 20lacs as of 31st March
Revaluation done for building in month of Jun 25lacs.
so here after revaluation the value of building stands increased by 5lacs. so below entry to be posted
Building Dr 5 lacs
To Revaluation Reserve. 5lacs
So this balance to be shown under reserves and surplus against revaluation reserve
Now say suppose after revaluation the value of building stands at 15 lacs. so here there's a decrease in the value. so this will be debited to Revaluation reserve and building to be credited.if RR does not have sufficient balance the difference to be routed through p&l
Revaluation done for building in month of Jun 25lacs.
so here after revaluation the value of building stands increased by 5lacs. so below entry to be posted
Building Dr 5 lacs
To Revaluation Reserve. 5lacs
So this balance to be shown under reserves and surplus against revaluation reserve
Now say suppose after revaluation the value of building stands at 15 lacs. so here there's a decrease in the value. so this will be debited to Revaluation reserve and building to be credited.if RR does not have sufficient balance the difference to be routed through p&l
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