What is the typical double entry when recognizing a revaluation surplus (increase in asset value)?

What is the typical double entry when recognizing a revaluation surplus (increase in asset value)?

• A. Dr NCA At Cost; Dr Acc Depn; Cr Revaluation Reserve
• B. Dr Revaluation Reserve; Cr NCA At Cost
• C. Dr Bank; Cr Revaluation Reserve
• D. Dr NCA At Cost; Cr Bank; Cr Revaluation Reserve

Answer: (A)

When a revaluation surplus occurs, the asset’s carrying amount is increased and the corresponding increase is captured in equity as a Revaluation Reserve. The asset is adjusted to reflect its higher value, and that rise in value is not charged to profit or loss. The chosen approach shows the asset’s value being increased by debiting the Non-current Asset at cost and also addressing the accumulated depreciation (debiting Accumulated Depreciation) so that depreciation going forward is based on the new, higher amount. The increase is funded by crediting the Revaluation Reserve, which sits in equity. This aligns with the principle that the upward adjustment to value is recognized in equity rather than in the income statement. Other options involve cash receipts or transfers to or from equity in ways that don’t reflect increasing the asset’s carrying amount and setting up the corresponding revaluation reserve.

When a revaluation surplus occurs, the asset’s carrying amount is increased and the corresponding increase is captured in equity as a Revaluation Reserve. The asset is adjusted to reflect its higher value, and that rise in value is not charged to profit or loss.

The chosen approach shows the asset’s value being increased by debiting the Non-current Asset at cost and also addressing the accumulated depreciation (debiting Accumulated Depreciation) so that depreciation going forward is based on the new, higher amount. The increase is funded by crediting the Revaluation Reserve, which sits in equity. This aligns with the principle that the upward adjustment to value is recognized in equity rather than in the income statement.

Other options involve cash receipts or transfers to or from equity in ways that don’t reflect increasing the asset’s carrying amount and setting up the corresponding revaluation reserve.