How will you classify the same land held for more than one year as an investment...
How will you classify the same land held for more than one year as an investment property or for personal use? Why will your classification different from holding it less than one year for the same purpose?
Homework Answers
Classify the same land held for more than one year as an investment property or for personal use
If the owner uses part of the property for
- its own use
- and part to earn rentals
- or for capital appreciation,
and the portions can be sold or leased out separately, then the investment property are accounted for separately. Hence the part that is rented out is investment property and the one which is not rented out is for personal use.
If the portion cannot be sold or leased out separately as mentioned above then the property is investment property only if the owner-occupied portion is insignificant.
Classification different from holding it less than one year for the same purpose
The main categories of assets are:
- Current Assets: Current assets are a business’s most liquid assets and are expected to be converted to cash within one year.
- Long-Term Assets: Long-term assets or non-current assets are not expected to be converted to cash within one year and held for more than a year.
Hence the classification will be different if the property is held for less than one year.
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How will you classify the same land held for more than one year
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