Question

How are long-lived assets reported and analyzed.

Answer 1

Answer:

Definition- Long-lived assets are those assets which companies expects to keep in its business for more than 1 year in order to support its business operations. For example- Plant and machinery, Land and Building, other tangible assets. Also, certain intangible assets are also taken as a long lived assets since it will provide benefit for more than 1 year,

Reporting and analysis:

Long- lived asset are recorded at cost at the time of purchase in the books of accounts and yearly it is depreciated or amortised.

Example- Plant and machinery purchased at a cost of $200000 and it is expected that it will have a useful life of 5 years.

In this case the reporting shall be:

1. Plant and machinery a/c Dr. $200000

To Bank a/c $200000

( Being long lived asset purchased)

2. Depreciation a/c Dr. $40000

To Plant & Machinery a/c $40000

(Being long lived asset depreciated)

Hence, this is the reporting and analysis mechanism.