Journal Entries of Revaluation of Assets

In the journal entries of revaluation of assets, we record all changes in the value of fixed assets. As per the cost concept, we have no right to record increase or decrease in the value of fixed asset. It should be kept on its historical book cost value. Now, time is going fast. All old concepts of accounting are being modified on 
the basis of revaluation concept. As per new concept, our all assets should be upto dated. An investor who check our financial statement should not mislead by providing old information in the statements. Upto dated information means, if any asset's value is decreased due to impairment, our balance sheet should cut the same loss from that specific loss. If our investments like shares and stock have increment, it should be recorded in our financial statements.

Now, all these things can be possible with journal entries of revaluation of assets.

(1) If there is an decrease in the vale of assets:

  

         Revaluation Account   Debit
        
             Fixed Assets Account Credit 

(2) If there is an increase in the value of assets:

        Fixed Assets Account    Debit

            To Revaluation Account Credit 

Example:

Assume on December 31, 2011 the company intends to switch to revaluation concept and carries out a revaluation exercise which estimates the fair value of the building to be $200,000 as at December 31, 2011. The book value at the date is $150,000 and revalued amount is $200,000 so an upward adjustment of $50,000 is required to building account. It is recorded through the following journal entry:

1 .For recording the revaluation surplus  on the building. 

Building Account Debit  50,000 
Revaluation Account Credit         50,000

2. For transferring the revaluation surplus to the equity share capital. 

Revaluation Account Debit 50,000

Equity Share Capital Account Credit 50,000

If we do not open the revaluation account, we can directly debit the asset account and credit the equity share capital account in case of any surplus. For example, if we there is surplus of $ 1,00,000 in the value of shares in which we have invested. We can easily pass the journal entry of share investment account Dr. to Equity share capital account Cr.

If there is any decrease in fixed asset, we can also debit the equity share capital account and credit  the asset account.