Revaluation of a Plant

Revaluation of a plant is a process of reassessing the value of the plant after a certain period of time. The plant's value may increase or decrease depending on various factors such as market conditions, technological advancements, depreciation, and others.

Credit to Revaluation Surplus Account

If the revaluation results in an increase in the plant's value, then the difference between the original cost and the revalued amount is credited to the Revaluation Surplus Account. This account is a reserve account maintained in the balance sheet to show the unrealized gain in the value of the plant.

Explanation of the Scenario

In this scenario, a plant with an original cost of Rs. 50,00,000 was revalued after 2 years. Let's assume that the revalued amount is Rs. 60,00,000. The difference between the original cost and revalued amount is Rs. 10,00,000.

As the revalued amount is higher than the original cost, the difference of Rs. 10,00,000 will be credited to the Revaluation Surplus Account. This will increase the reserve amount in the balance sheet, which can be used for various purposes such as dividend distribution, capital expenditure, and others.

Conclusion

Revaluation of a plant is an important process to assess the plant's value and make necessary adjustments in the balance sheet. The credit to the Revaluation Surplus Account shows the unrealized gain in the plant's value and increases the reserve amount in the balance sheet.