2. Why do firms revalue fixed assets
• It provides useful information to the users of accounts.
• It enables performance ratios to be calculated more
satisfactorily.
• For external users of accounts i.e. financial institutions
when seeking sources of finance.
• Assets should be valued at the market price in order to
show a true and fair view.
• NB land does not usually depreciate unless extraction
takes place e.g. mine
3. Revaluation
• Revaluation of a fixed assets is the process of entering
the value of company's - assets in accounts at their try
market value
Land and Building Account
Revaluation 150,000
Revaluation Reserve Account
Land and Buildings 150,000
4. Revaluation of Fixed Asset
• Assets (land and buildings) increase in value. Hence
revaluation.
• DR Asset a/c
• CR Revaluation a/c (with increase account)
• DR Provision for Depreciation a/c
• CR Revaluation a/c
• When buildings are revalued , write off depreciation
5. Revaluation of Fixed Asset
• When the revalued asset is disposed of:
• DR Revaluation Reserve a/c
• CR Revenue Reserve a/c
(with the total amount relating to the asset)
When you sell a revalued asset calculate depreciation since the
last revaluation
6. Things to Note
• When revaluation takes place you must transfer any
depreciation on that revaluated to the revaluation reserve
account from the provision for depreciation account.
• Dr Depreciation A/C
• Cr Revaluation A/C
• When the question give a separate figure for land, land does
not depreciate.
7. The End of a Question
• The last entry is usually where an asset is sold and the
remaining ones are revalued.
• Be CAREFUL WITH THE ASSET SOLD. Follow down to
see was it revalued as you have to put the latest revalued
amount into the disposal account not the cost of it.
• Depreciation of it has to go as well
• Revalue the assets and then do that year’s depreciation.