Question 2 (b)
Journal entries for revaluation of PPE (AS-10 Revised)
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 2 (b) · 6 marksTagore Industries had Property, Plant & Equipment (PP&E) whose book value was Rs. 90,00,000 on 31st March 2024. As part of its practice of revaluing assets on a yearly basis, the Fair Value was assessed on 31st March 2023. Pass the Journal Entry necessary in each of the following cases:
If, as a result of Revaluation done on 31st March 2024, the Fair Value was Rs. 97,00,000.
If Last year the property had been revalued downwards by Rs. 4,00,000, the decrease of that asset being recognized in the Profit and Loss Account, and the Fair Value as a result of Revaluation done on 31st March 2024 was Rs. 97,00,000.
If Last year the property had been revalued upwards by Rs. 9,00,000, the increase of that asset being recognized in revaluation reserve account, and the Fair Value as a result of Revaluation done on 31st March 2024 was Rs. 78,00,000. (2×3)
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- (i)–(iii)3 items, each marked on its own: give each its share.
- Journal EntryEach entry: the date, the debit and credit lines, and a one-line narration.
What the paper leaves open
The paper says the fair value was assessed on 31st March 2023 (in our version), a year before the book value and all three revaluations (31st March 2024). It is read as a misprint for 31st March 2024, since an assessment a year earlier could not be set against a book value struck a year later. The journal entries do not depend on it.
Write it in this order
- Read the data; tick every adjustment as you plan it 1 min
- 1 Case (i): plain upward revaluation 2 marks 3 min
- 2 Case (ii): upward reversing prior P&L decrease 2 marks 3 min
- 3 Case (iii): downward against existing surplus 2 marks 3 min
- Check: every adjustment used, both sides agree, dates in 2 min
Final answer
Check your own figures against these.
- (i)
- ₹7,00,000 to surplus
- (ii)
- ₹4,00,000 to P&L + ₹3,00,000 to surplus
- (iii)
- ₹9,00,000 against surplus + ₹3,00,000 to P&L. Each entry balances
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution and check your figures against the final answer.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
The rules (AS-10, paras 42–43). An increase in carrying amount on revaluation is credited directly to owners' interests under the heading of revaluation surplus, except that it is recognised in the statement of profit and loss to the extent it reverses a revaluation decrease of the same asset previously recognised there. A decrease is charged to the statement of profit and loss, except that it is debited directly to revaluation surplus to the extent of any credit balance existing in the surplus for that asset.
Case (i): plain upward revaluation
| PP&E on 31 March 2024 | ₹ |
|---|---|
| Book value before revaluation | 90,00,000 |
| Increase on revaluation: credited to Revaluation Surplus | 7,00,000 |
| Fair value (revalued amount) | 97,00,000 |
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| PP&E A/c … Dr To Revaluation Surplus A/c | 7,00,000 | 7,00,000 |
Case (ii): upward revaluation reversing a prior downward revaluation charged to P&L
Increase = ₹7,00,000. Of this, ₹4,00,000 reverses the prior decrease that was charged to the Profit and Loss Account (so it is credited back to P&L); the remaining ₹3,00,000 goes to Revaluation Surplus.
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| PP&E A/c … Dr To Profit & Loss A/c To Revaluation Surplus A/c | 7,00,000 | 4,00,000 3,00,000 |
Case (iii): downward revaluation against an existing revaluation surplus
Decrease = 90,00,000 − 78,00,000 = ₹12,00,000. Of this, ₹9,00,000 is debited to the existing Revaluation Surplus and the remaining ₹3,00,000 is charged to the Profit and Loss Account.
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Revaluation Surplus A/c … Dr Profit & Loss A/c … Dr To PP&E A/c | 9,00,000 3,00,000 | 12,00,000 |
Result: (i) ₹7,00,000 to surplus; (ii) ₹4,00,000 to P&L + ₹3,00,000 to surplus; (iii) ₹9,00,000 against surplus + ₹3,00,000 to P&L. Each entry balances.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Case (i): plain upward revaluation | 2 |
| 2 | Case (ii): upward reversing prior P&L decrease | 2 |
| 3 | Case (iii): downward against existing surplus | 2 |
| Total | 6 |
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