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Simple English definitions for legal terms
appreciation surplus
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A quick definition of appreciation surplus:
Appreciation surplus is a term used to describe the extra money a company makes when the value of its assets increases. This happens when the company's assets are revalued at a higher price than what they were originally bought for. It is also known as revaluation surplus. This extra money is added to the company's net worth, which is the total value of everything the company owns. It is important for companies to keep track of their surplus, as it can be used to pay off debts or invest in new projects.
A more thorough explanation:
Definition: Appreciation surplus is a type of surplus that is gained when assets are reappraised at a higher value. It is also known as revaluation surplus.
Examples: Let's say a company owns a building that was purchased for $500,000. After a few years, the value of the building has increased to $700,000. The appreciation surplus would be the difference between the original cost and the new value, which is $200,000.
Another example could be a company that owns stocks in another company. If the value of those stocks increases, the appreciation surplus would be the difference between the original value and the new value.
Explanation: Appreciation surplus is a type of surplus that is gained when the value of an asset increases. This can happen due to various reasons such as market conditions, inflation, or improvements made to the asset. The examples illustrate how the appreciation surplus is calculated when the value of an asset increases.