Urgent please

Land and bldg a/c dr

    To  revaluation a/c

land a\c      dr      1.5cr

    to revaluation res a\c    1.5 cr

being revaluation of land

Land A/c ......Dr     1.5Cr

   To Revaluation Reserve A/c  1.5cr

(Being upward revaulation in book value of Land)

Point to note:

1. The increase in value of fixed assets because of revaluation of fixed assets is credited to ‘Revaluation Reserve’, and is not available for distribution as dividend. Revaluation Reserve is treated as a Capital Reserve.
2. The increase in depreciation arising out of revaluation of fixed assets is debited to revaluation reserve and the normal depreciation to Profit and Loss account.

Land A/c                     Dr    1.5 cr

  To Revaluation A/c                         1.5 cr.

When Asset increase n liabilities decrease.............   Revaluation A/c is credited ( good things)

When Asset decrease n liabilities increases............ Revaluation A/c is debited (bad things)

Thank you so much guys for your valuable reply.. pls let me know one more thing that after revaluation of land. On which amount we have to pay capital gain tax. Is 3 crore amount after revaluation of land will be our cost of acquisition and suppose its building instead of land than should we have to charge depreciation on whole amount after revaluation of land?

@ all May i know according to which Accouting standard this revaluation can be done?

as per section 54 the acqusation cost of land will be the purcashe price of land ,if it acuqired on before 1981 then fair market value,so you can not take the cost of land of upwared value , becasue when you will calculate the capital gain you will take the benifit of  cost of inflation  index.

as you posted regard the upward value of machinery it's value is appreciated only when there is change in depreciaton method,change in esimation life of assests etc.so you can charge the depreciaton on upward value of assests.  in this case the cost of machinery will be w.d.v of previous year of machine. 

Land A/c ......Dr     1.5Cr

   To Revaluation Reserve A/c  1.5cr

For audit purpose you can take valuation certificate from valuer that support value of your land is Rs. 3.50 crore. (it must required at the time of Income tax assessment).

Depriciation is not charged on land

If its building then make sure that for the purpose of charging depriciation, cost of land and building are segregated and depriciation is charged only on building (again you can't charge depriciation on land)

If you are also revaluating the building and there is increase in value of building then following entries may be considered

land

to revaluation (for enhanced value of land)

Building A/c

to revaluation reserve (enhanced value)

dep 

to building

P&L

to dep (normal )

revaluation reserve

to depriciation ( dep. on enhanced value only)

Capital gain tax will be attracted if all the assets in the block are sold and fair value consideration is more than WDV of asset

[as per sec 43(6) WDV of Block of asset  is arrived by]

o/p value of block at the begining of the p/y

add actual cost

less money payable

_______________

WDV for the purpose of dep.

(revalued part has not been taken into consideration)

in case of land or land only

Capital gain tax will be attracted if all the assets in the block are sold and fair value consideration is more than ICOA/COA ,expense on t/f,ICOI/COI and exemptions taken together ,  of  asset

[second proviso to sec 48 / sec 48]

Full value consideration

less expense on t/f

less ICOA/COA

less ICOI/COI

LTCG/STCG

less exemptions under various sections

(when Income tax act is giving you the benefit of indexation , then why should they give you the benefit of revaluation?  Indexation is arrived by computing the increase in value )

your means to say that if its building and we revalue it than we can also claim depreciation on revalue of building amount i.e. 3 crore.

and also let me know how to sett off revaluation reserve in balance sheet?

@ Prashant

<quote>Guidance Note on Treatment of Reserve Created on Revaluation of Fixed Assets

</quote>

source:https://www.icai.org/post.html?post_id=1409

Revaluation reserve A/c dr.

 to dep

(this entry will be for the books of accounts , not for income tax purpose )

for income tax , in my opinion
sec 43(6)   and  sec 48 / second proviso to sec 48  are applicable ,where you do not get the benefit of revaluation

Land and Building A/c                   Dr

               To Revaluation A/c