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SSC Financial and Cost Accounting P-1 QUESTION #9618
Question 1
A fixed asset costing Rs. 300,000 is depreciated on a straight-line basis at 20% per annum. After three full years the management decides to revalue it to its current market value of Rs. 180,000. Under Option 1 (eliminating accumulated depreciation against cost), what is the journal entry to record the revaluation gain?
  • Debit: Asset A/c Rs. 60,000; Credit: Revaluation Reserve Rs. 60,000✔️
  • Debit: Revaluation Reserve Rs. 60,000; Credit: Asset A/c Rs. 60,000
  • Debit: Asset A/c Rs. 60,000; Credit: P&L Account Rs. 60,000
  • Debit: Asset A/c Rs. 180,000; Credit: Revaluation Reserve Rs. 180,000
Correct Answer Explanation
After 3 years: Accumulated Depreciation = 300,000 × 20% × 3 = Rs. 180,000; WDV = Rs. 120,000. Under Option 1, accumulated depreciation is first eliminated: Dr. Acc. Dep Rs. 180,000 / Cr. Asset Rs. 180,000 (making net asset Rs. 120,000). Then asset is increased to market value Rs. 180,000: increase = 180,000 – 120,000 = Rs. 60,000. Entry: Dr. Asset Rs. 60,000 / Cr. Revaluation Reserve Rs. 60,000.