A Description Of The Fixed Asset Accounting
Fixed asset in the accounting parlance refers to the assets that cannot be easily converted into cash. For instance the property, plant, equipment used by an organization falls into the category of the fixed assets. In majority of the cases the fixed assets are the tangible assets of the organization. The fixed assets are the asset that cannot be and are not sold directly to the customers of the organization. These assets are the assets that have value and are used by the organization in its operations for an extended period of time. Some of the items that are generally considered to be the fixed assets are the land, buildings, furniture, motor vehicles, office equipment, computers, furniture, fixture and fittings, machinery as well as plant. Going by the definition of the fixed assets by the International Accounting standard (IAS)-The fixed assets are the assets whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably.
The cost of a fixed asset includes its purchase price, the import duties, the other deductible trade discounts as well as rebates. Also included is the expenditure incurred in bringing as well as installing the asset to its needed location and also the approximate cost of dismantling and removing the asset from its current location if it is no more needed.
It is a known fact that the primary objective of any business endeavor is to increase the wealth of the owners of the business. In the case of the fixed asset accounting it is expected that the management of the company would apply the basic accounting concept of “Matching Concept”. In this concept the expenses as well as the revenue of the company are matched against each other in the given period of time. Another known fact about the fixed assets is that their use in generating the revenue for the business is a long term one. In the fixed asset accounting it is expected that the net income or the profit for the depreciation period is charged on the total cost of the asset that contributed to the revenue for the period in consideration. In fixed asset accounting, the careful reporting of the net revenue for the asset in the period considered.