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ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income

Kiln Co revalues a building on 1 January from a carrying amount of $400,000 to $520,000. Immediately before this the building had no revaluation surplus. The remaining useful life is 20 years. What is the double entry to record the revaluation?

Debit Building $120,000 and credit revaluation surplus $120,000, recognised in other comprehensive income. The increase is the difference between the new value of $520,000 and the carrying amount of $400,000, and no earlier loss on this asset exists to be reversed through profit or loss.

  1. ADr Building $120,000; Cr Revaluation surplus (other comprehensive income) $120,000Correct
  2. BDr Building $120,000; Cr Profit or loss $120,000
  3. CDr Revaluation surplus $120,000; Cr Building $120,000
  4. DDr Building $520,000; Cr Revaluation surplus $520,000

Explanation

The increase is $520,000 - $400,000 = $120,000. It is debited to the asset and credited to revaluation surplus via other comprehensive income, since there was no earlier revaluation decrease charged to profit or loss. Crediting profit or loss is wrong in this situation.

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