Question

Extract from a trial balance as at 30 June 20X6:

	£000	£000
Land at cost	2,160.0
Buildings at cost	1,080.0
Accum. Depreciation Buildings 30.06.20X5		432.0

A revaluation of the land and buildings on 1 July 20X5 resulted in land increasing by £3,240,000 and buildings increasing by £972,000. This has not yet been recorded in the financial statements.

1. Record the two revaluation transactions above (the one in relation to the land revaluation and the other one in relation to the buildings revaluation).

You can either use the expanded accounting equation or debits/credits in your answer.

Answer 1

In question it has been asked to record revaluation of Lan and Building.

Before recording entry of the same we will understand the the basic regarding Re-Valuation of assets.  

Re valuation of assets is a process in which value of Assets are adjust towards increase or decrease in response to chnage in its revalued or in its fair market value.

Re valuation of assets in other words we can say that, An increase in an asset's value in order to reflect the current market value.  

Earlier when assets has been purchased at that time same has been recorded at cost .

An Increase in value of assets is not considered as gain and same is not recorded in income statement.

It is credit to a shareholder's equity accout by giving seperate ladger named as Revaluation Surplus.  

Any increase or decrease in asstes value due to revaluation has been recorded in Revaluation Surplus instead of recording it as gain or loss in income statement.  

Journal Entry for Revaluation of assets recorded  as folllow :

Assets Account Dr. ----

To Revaluation Surplus Account Cr. -----

Effect of Revaluation Surplus Account is reflected in balance sheet under shareholder's equity and retained earning title instead of income statement.  

Now we will solve our question.  

In question it has been provided that on 01 July 20X5 Revaluation of Land and Building resulted land increase by £ 3,240,000 and building increasing by  £ 972,000.

We have been asked to Record the Revaluation of Two Assets.  

Revaluation entry of above two assets will be as follow :

Date	Particulars	Dr Amount  £	Cr Amount  £
01 July 20X5	Land Account Dr	3,240,000	-
	To Revaluation Surplus Account Cr .		3,240,000
	( Being Revaluation of Land Recorded )
01 July 20X5	Building Account Dr	972,000
	To Revaluation Surplus Account Cr.		972,000
	( Being Revaluation of Building Recorded )