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Revaluation Reserve

Rakesh Kalyani (124 Points)

28 March 2019

what is revaluation Reserve?why is it current liability?plz explain me with example

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Giridhar S Karandikar (Team Lead) (7543 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

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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) (7543 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