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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"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