Long Term Assets
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From Wikipedia, the
free encyclopedia Fixed asset,
also known as a non-current asset or as property, plant, and
equipment (PP&E), is a term used in accounting for assets and property
which cannot easily be converted into cash. This can be compared with
current assets such as cash or bank accounts, which are described as liquid
assets. In most cases, only tangible assets are referred to as fixed.
Moreover, a fixed/non-current asset can
also be defined as an asset not directly sold to a firm's
consumers/end-users. As an example, a baking firm's current assets would be
its inventory (in this case, flour, yeast, etc.), the value of sales owed to
the firm via credit (,i.e. debtors or accounts receivable), cash held in the
bank, etc. Its non-current assets would be the oven used to bake bread,
motor vehicles used to transport deliveries, cash registers used to handle
cash payments, etc. Each aforementioned non-current asset is not sold
directly to consumers. |
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These are items of value which the
organization has bought and will use for an extended period of time; fixed
assets normally include items such as land and buildings, motor vehicles,
furniture, office equipment, computers, fixtures and fittings, and plant and
machinery. These often receive favorable tax treatment (depreciation
allowance) over short-term assets. According to International Accounting
Standard (IAS) 16, Fixed Assets are assets whose future economic benefit is
probable to flow into the entity, whose cost can be measured reliably.
It is pertinent to note that the cost of a fixed asset is its purchase
price, including import duties and other deductible trade discounts and
rebates. In addition, cost attributable to bringing and installing the asset
in its needed location and the initial estimate of dismantling and removing
the item if they are eventually no longer needed on the location.
The primary objective of a business entity is to make profit and increase
the wealth of its owners. In the attainment of this objective it is required
that the management will exercise due care and diligence in applying the
basic accounting concept of “Matching Concept”. Matching concept is simply
matching the expenses of a period against the revenues of the same period.
The use of assets in the generation of revenue is usually more than a year-
that is long term. It is therefore obligatory that in order to accurately
determine the net income or profit for a period depreciation is charged on
the total value of asset that contributed to the revenue for the period in
consideration and charge against the same revenue of the same period. This
is essential in the prudent reporting of the net revenue for the entity in
the period.
Net book value of an asset is basically the difference between the
historical cost of that asset and it associated depreciation. From the
foregoing, it is apparent that in order to report a true and fair position
of the financial jurisprudence of an entity it is relatable to record and
report the value of fixed assets at its net book value. Apart from the fact
that it is enshrined in Standard Accounting Statement (SAS) 3 and IAS 16
that value of asset should be carried at the net book value, it is the best
way of consciously presenting the value of assets to the owners of the
business and potential investor. |
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Long Term Assets
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Dictionary -
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Learn about tangible
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simplestudies.com/accounting-for-long-term-assets.html
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The use of
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en.wikipedia.org/wiki/Fixed_asset
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Long term
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