How to account for change in residual value of fixed asset?
International Accounting Standard (IAS) 16 recognizes that residual value of asset may increase or decrease as a result of revaluations or future assessments of non-current asset. IAS 16 recognizes such change as a change in accounting estimate i.e. adjustment will be prospective in nature. There is no need to adjust for previously recorded depreciation charge […]
How fixed assets are revalued if fair value cannot be determined using market value?
IAS 16 Property, Plant and Equipment (IAS 16) recognizes the fact that fair value of every asset may not be determined using market value basis. Although it is recommended and hardly the case where market information does not help but still exceptions exist. IAS 16 recognises such assets specialized assets for which fair value cannot […]
Can we depreciate asset below residual value?
Main purpose of depreciation is to reduce the value of asset over its useful life in such a systematic way that such reduction corresponds with the rate at which benefits are rendered from the assets. To learn more about what is depreciation? You can visit this page. International Accounting Standard (ISA) 16 Property plant and […]
What is the difference between depreciation account and accumulated depreciation account?
Capital assets also known as fixed assets are simply such assets which are used over a period longer than one year. Although real cash outflow takes place for the whole price at the time of acquisition of such assets however, for reporting purposes such costs are not expensed out in the year of purchase of […]
Is Residual value of the asset calculated on Present value or Future value basis?
One of the reasons for charging depreciation against the historical cost of the asset, revalued amount or simply carrying value of asset is that asset’s book value should be reduced to such residual value which was expected at the time of purchase. For that, depreciation expense charged in an accounting period is adjusted accordingly. Residual […]
What is meant by Economic benefits and how they flow to the entity?
It is easy to understand that entities around the world hold different sets of machinery, plant, equipment, building, land and other kinds of assets through which it offers products or services to its customers and in return earn income and generate cash. Products are made through different machines and the value these machines and equipment add […]
What is Depreciation?
Depreciation basically signifies a steady decline in the value of asset. Generally it is studied in terms of the period of time that such decline in the value took place. Therefore, it is also described as the value lost by the asset over useful life of the asset i.e.the period of time for which it […]
What are different causes of Depreciation?
Here are some of the reasons or causes of depreciation: Physical loss Any damaging change in the physical features of the asset or in the productivity, efficiency or effectiveness of the asset either because of the usage, perishability, or any mishap will result in the decrease in the value of asset and subsequent disposal will […]
What is the difference between Purchase ledger and Purchase account?
Quite a basic question in fact. A lot of students realize about these concepts as soon as they start studying Auditing especially when they have to apply different audit procedures where these basic concepts play pivitol role and thus we cannot escape them. To begin with, we need to clear one misconception that LEDGER is […]
What is french straight line method of depreciation?
French straight line depreciation method is not completely a new method to calculate depreciation. Rather it is more of a derivation or extended version of usual straight line method accounting students learn in depreciation topic. And many students learn french straight line method under the name of straight line method. But they are not completely the […]