Hi Guys,
We’ve set up a Fixed Asset which is a property worth £120,000. There is to be £30,000 of work undertaken to this property.
After the work has been undertaken the value is likely to be around £180,000. How/where would I update the value of the asset?
Thanks
N
Post payments for the improvements to Fixed assets and the asset’s subaccount. This will increase the acquisition cost of the asset, raising its book value.
Market value is a separate issue. How you handle that depends on local laws and accounting standards. In some jurisdictions, you must revalue assets on a periodic basic. In others, you do not, and capital gains or losses are taken up upon disposal.
So use the journal entry button to make the necessary entries. As @Tut said, enter the improvement first and then revalue the asset using journal entries.
That would depend if the property is being depreciated or not. If the property is being depreciated then you wouldn’t add the revaluation to the property asset itself.
The journal would be
Debit - Asset > Fixed Asset > (Asset) 30,000
Credit - Equity > Asset Revaluation 30,000
For publicly (stock exchange) listed business, the revaluation is income first, then Equity via the retained earning.
Unless you have a specific reason for revaluing the asset on your Balance Sheet I’d recommend you keep them at cost. This will keep things simpler and avoids you having to review the asset value on a regular basis. Also, unless you make appropriate notes you may make mistakes in calculating the correct capital gain for tax purposes when you sell the asset.
So, don’t rush to do all these fancy entries unless you have a valid reason.