Treatment of Investment Reserve and Claim in Revaluation Account, Capital, and Balance Sheet

Investment Reserve and Claim

Investment reserve refers to the reserve earned by a company from its investments. On the other hand, a claim refers to the right of a person to demand something from another person. In accounting, a claim refers to an amount that a company is entitled to receive from another party.

Treatment in Revaluation Account

When there is an increase in the value of assets or liabilities of a company, the difference between the original and the new value is recorded in the revaluation account. In this case, since there is an increase in the claim, it will be recorded in the revaluation account.

Revaluation Account Dr. 50000 (90000-40000)

Treatment in Capital

The revaluation account is then transferred to the capital account. This is done to reflect the increase in the value of the company's assets. The amount is added to the capital account.

Capital Account Dr. 50000

Treatment in Balance Sheet

The balance sheet is a financial statement that shows the company's assets, liabilities, and equity at a given point in time. In the balance sheet, the investment reserve and the claim are shown separately.

On the asset side, the investment reserve will be shown as a part of the reserves and surplus. On the liability side, the claim will be shown as a part of the current liabilities.

Assets
Reserves and Surplus
Investment Reserve 40000

Liabilities
Current Liabilities
Claim 90000

Conclusion

In conclusion, the increase in the claim will be recorded in the revaluation account, which will then be transferred to the capital account. The investment reserve and the claim will be shown separately on the asset and liability side of the balance sheet, respectively.