Journal Entries for Revaluation of Investment Property
Revaluing an investment property involves adjusting its book value to reflect its current fair market value. This adjustment is typically recorded in the revaluation surplus account under equity. Here are the journal entries for the revaluation of investment property:
1. Revaluation Increase
If the fair value of the investment property increases, the journal entry is:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-07 | Investment Property A/c | 100,000 | |
| To Revaluation Surplus A/c | 100,000 | ||
| (Being revaluation increase of investment property) |
2. Revaluation Decrease
If the fair value of the investment property decreases and there is a previous revaluation surplus, the decrease is charged against it:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-07 | Revaluation Surplus A/c | 50,000 | |
| To Investment Property A/c | 50,000 | ||
| (Being revaluation decrease of investment property) |
If there is no revaluation surplus or the decrease exceeds the surplus, the excess is recognized as an expense:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-07 | Revaluation Surplus A/c | 50,000 | |
| Loss on Revaluation of Investment Property A/c | 30,000 | ||
| To Investment Property A/c | 80,000 | ||
| (Being revaluation decrease of investment property, partially charged to surplus and excess recognized as loss) |
Explanation:
Revaluation Increase:
- Investment Property A/c is debited to increase the value of the investment property.
- Revaluation Surplus A/c is credited to reflect the increase in value under equity.
Revaluation Decrease (with surplus):
- Revaluation Surplus A/c is debited to decrease the surplus.
- Investment Property A/c is credited to decrease the value of the investment property.
Revaluation Decrease (exceeding surplus):
- Revaluation Surplus A/c is debited to decrease the available surplus.
- Loss on Revaluation of Investment Property A/c is debited for the excess amount recognized as a loss.
- Investment Property A/c is credited to decrease the value of the investment property.
