Fixed asset

Fixed assets are not consumable. They allow for the continued operations of the business or allow it to function smoothly. For instance, office buildings, factories, and delivery trucks all fall under this category.

The recording and accounting procedure for fixed assets is different from other types of assets. Each country has its own set of accounting practices, and these govern the treatment of such. These accounting practices help determine how depreciation of a specific asset is to be computed for, for example. General ledger accounts aid in the recording of fixed assets, which are all taken into account for taxation purposes, as well.

Fixed assets also appear on the company’s financial statement and balance sheets. The existence of these items add greater value to the company. In order to determine the value of these assets, it is important to take into account the amount for which they were bought as well as the rate at which they have depreciated over a given period of time. Depreciation is an important factor to consider, because certain fixed assets, particularly vehicles and heavy equipment, are subject to wear and tear over the years and not always perform as well as they used to, thus lowering their value. By allowing these factors to be reflected in the financial statement of a business, then overstatement of asset value is avoided, and therefore a clearer picture of the company’s financial situation is arrived at.

Comments
Leave a response

Leave a Response