Tag Archives | Assets

Top 7 Methods for Charging Depreciation

This article throws light upon the top seven methods for charging depreciation on assets. The methods are: 1. Fixed Installment 2. Diminishing Balance Method 3. Annuity Method 4. Depreciation Fund Method 5. Insurance Policy Method 6. Revaluation Method 7. Depletion Method 8. Machine Hour Rate Method. Method # 1. Fixed Installment: This is the oldest […]

Top 4 Valuation Concepts of Assets (With Evaluation)

The following points highlight the top four valuation concepts of assets. The concepts are: 1. Historical Cost 2. Current Entry Price (Replacement Cost) 3. Current Exit Price (Net Realisable Value) 4. Present Value of Expected Cash Flows. Valuation Concept # 1. Historical Cost: Cost has been the most common valuation concept in the traditional accounting […]

Combination of Values Approach

In this article we will discuss about the combination of values approach. The combination of values approach has been suggested as a way of avoiding some of the disadvantages of the different current value valuation methods. The Canadian Accounting Research Committee (CARC) favours a combined use of current entry and current exit prices. More specifically, […]

Advantages of Historical Cost

In this article we will discuss about the advantages of historical cost. Firstly, historical cost principle automatically requires the recording of all actual transactions in the past. The market value of finished goods can be ascertained without knowing how the goods were actually produced. But there is no way to determine the historical cost of […]

Current Assets: Meaning and Classification

In this article we will discuss about the meaning and classification of current assets. Meaning of Current Assets: Current assets are defined as “cash and other assets that are expected to be converted into cash or consumed in the production of goods or rendering of services in the normal course of business”. Items are included […]

AS-10 with Regard to Fixed Assets

AS-10 ‘Accounting for Fixed Asset’ has the following guidelines with regard to fixed asset: Determining the Cost of a Fixed Asset: The gross book value of an asset is the historical cost or the cost at which the asset is actually acquired. According to AS-10 Accounting for Fixed Assets’, cost is directly attributable cost of […]

Assets: Definition, Characteristics and Objectives

In this article we will discuss about Assets:- 1. Definition of Assets 2. Characteristics of Assets 3. Objectives of Valuation 4. Types. Definition of Assets: Financial accounting has basic elements like assets, liabilities, owners’ equity, revenue, expenses and net income (or net loss) which are related to the economic resources, economic obligations, residual interest and […]

Exchange of Plant Assets: 2 Reasons

The following pints highlight the two main reasons for exchange of plant assets. The reasons are: 1. Exchange of Dissimilar Plant 2. Exchange of Similar Plant. Reason # 1. Exchange of Dissimilar Plant: A plant asset may be exchanged for a similar asset, for example, an old machine traded in for a newer model or […]

Problems Relating to Accounting for Long-Term Assets

In this article we will discuss about the problems relating to accounting for long-term assets. First, what is the original acquisition cost of a particular long-term asset. Second, how should the amount of expense or period write off should be determined and allocated against yearly revenue to reflect the asset’s consumption. The other related issues […]

Working Capital: Meaning, Sources and Uses

In this article we will discuss about Working Capital:- 1. Meaning of Working Capital 2. Sources of Working Capital 3. Uses. Meaning of Working Capital: In common usage, the term funds means cash. However, accountants and financial executives think of ‘funds’ in a broader sense. They view the funds available to a business enterprise as […]

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