Question

Discuss fixed assets and cost determination in financial statements. Provide examples of fixed assets.

Answer 1

Answer

• Fixed Assets are the long term assets that are acquired and the benefit from these can be received from many of the coming future years.
  These fixed assets are used in the operations of business, be it production or administration.
  These are called ‘fixed’ assets because usually these are not movable in general sense.
  Examples of Fixed Assets can be:
  >Machinery Equipments,
  >Truck,
  >Plant factory
  >Building
  >Furniture, etc.
• The cost of the fixed costs to be disclosed in the financial statement is based on the ‘historical cost’ concept of accounting.
  As per this, fixed assets are to be recorded at cost that was incurred in acquiring the asset and making them ready for being used.
  Cost of the fixed assets include Purchase price, insurance, transportation cost, taxes, instalment cost etc.
  
  This Fixed assets are depreciation over their useful, the depreciation for each period gets accumulated in the respective ‘Accumulated Depreciation’ account.
  
  On the financial statements, the fixed assets are disclosed at ‘cost’ and the ‘accumulated depreciation’ balance is shown as a deduction from that cost.