Investment properties and depreciation

Investment properties and depreciation

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I've just taken on a new client and the accounts prepared by the previous accountant have some very strange things in! Most I have sorted but I need some help on the Investment properties.

The propreties are residential and rented out and purely been bought as an investment - I know not ideal through a Ltd company but they are there now.

They are freehold properties. The accounts show depreciation on them at 5% per annum. However last year they were revalued at a lot more than the value in the books.

I don't think they should be depreciated and in fact want to bring in a revaluation reserve. What do I do with the accumulated depreciation to date? Write it back to P+L or leave it running until the properties are sold?

Thanks

Pip

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Euan's picture
By Euan MacLennan
28th Feb 2013 13:25

Neither

"What do I do with the accumulated depreciation to date? Write it back to P+L or leave it running until the properties are sold?"

You write it back to the Revaluation Reserve.

Your journal entries are:

DR  Fixed Assets at cost or valuation - the difference between MV and cost

DR  Accumulated Depreciation - the balance brought forward

CR  Revaluation Reserve - the difference between MV and NBV brought forward

 

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By pipper01
28th Feb 2013 20:53

Reserve

Many thanks.

Pip

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