You\u2019re using valuation method to account for the cost of your fixed assets and every now and then you need to value your assets up leaving you with a revaluation surplus as a part of the equity.<\/p>\n
What happens if you dispose of the asset however? What happens with the revaluation surplus? Regardless of how you\u2019ve decided to treat the surplus while depreciating the asset over it\u2019s use, if you decide to dispose the asset and it has a revaluation surplus remaining on the balance sheet, it needs to be accounted somehow.\u00a0<\/p>\n
This \u201csomehow\u201d is as follows: once you\u2019ve decided to dispose of the asset, you account for the disposal as you\u2019d do with any other asset \u2013 cost credited, accumulated depreciation debited on the balance sheet and the difference between those two debited into expense on the income statement. The revaluation surplus in this case would be accounted directly to retained earnings \u2013 Db Revaluation Surplus and Cr Retained Earnings.<\/p>\n
The reason for accounting the surplus directly to retained earnings rather then profits of the current period is to not affect current year results with one-off transactions that aren\u2019t in any way relating to current period actions \u2013 no revaluation was really done per say, no actions were taken which would need to be reflected as profits for the period relating to the asset. And if you think about it, the surplus relates to a revaluation done in some prior period \u2013 even more so should the surplus be accounted into retained earnings.<\/p>\n","protected":false},"excerpt":{"rendered":"
You\u2019re using valuation method to account for the cost of your fixed assets and every now and then you need to value your assets up leaving you with a revaluation surplus as a part of the equity. What happens if you dispose of the asset however? What happens with the revaluation surplus? Regardless of how […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,33,57],"tags":[],"class_list":["post-4645","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-5-property-plant-and-equipment","category-1-5-5-valuation"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=4645"}],"version-history":[{"count":1,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4645\/revisions"}],"predecessor-version":[{"id":4646,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4645\/revisions\/4646"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=4645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=4645"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=4645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}