Disposal of PPE held under revaluation Model

JNl entry for Disposal of PPE held under revaluation Model

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Hi,  I have a Ltd company that has equipment that has been revalued under the revaluation model (FRS 102 Section 1A).  The item originally cost £65K  and was revalued by £30K a few years ago, the item has not been depreciated as it was always expected to gain in value. The entry for the revaluation was DR PPE CR Revaluation reserve (reported through OCI). The equipment has been sold for a £100K. 

My question is what is the JNL entry on the disposal of the item (I seem to be confusing myself over the £30K revaluation and if I include it in the NBV of my equipment that is disposed off). From reading I believe my entry should be CR PPE (balance sheet) £95K CR Sales Proceeds (P&L) £5K DR Bank (Balance Sheet) £100K, transfer the £30K in the revaluation reserve to retained earnings?

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John Toon
By John Toon
22nd Apr 2024 13:12

Your journal is pretty much correct - I would suggest your credit to sales proceeds, should actually read profit on disposal. You make no mention of deferred tax, which should have been accounted for on the initial revaluation so either you've excluded it for simplicity or your accounting has been wrong from the start.

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Replying to johnt27:
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By Bells7788
22nd Apr 2024 16:16

Thank You for taking the time to respond, it is greatly appreciated.

Yes, that is correct the wording in the accountancy software is something along the lines of 'profit on disposal' as opposed to the wording I used in my email.

Deferred tax has been accounted for but I did not mention it in my email. The original entry was CR Provision for Deferred tax (balance sheet) DR Deferred tax (going through OCI via the reserve revaluation, not the P&L). I will reserve this out now that the item has been disposed off DR provision for Deferred tax CR Deferred tax (again OCI via the reserve revaluation).

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