Is created by the directors of a limited company when non-current assets are revalued upwards. It is a capital reserve , so it is not available for distribution as cash dividends. It can be used for the issue of bonus shares . Sole traders and partnerships do not create revaluation reserves. (See going-concern concept .)
R Preston plc balance sheet extract at 30 November 20*9:
Premises at cost 170 000
Less depreciation 12 000 158 000
The directors have recently had the premises valued by Maybins, a firm of professional valuers, at £210 000.
Journal entries to record the revaluation in the books of R Preston plc.
Premises 40 000
Provision for depreciation of premises 12 000
Revaluation reserve 52 000