Question

Which of the following fixed asset is shown at cost rather than book value?​

Answer 1

Answer:

• To understand the presentation of assets in the books the following concepts needs to be understood:-
• a. cost: all costs which are necessary / incurred to bring an asset in to its present useable condition and net off taxes and duties which can be received back as refund or input credit. normally this is also called as historical cost.
• b. depreciation: it is a diminishment in value of assets to present the wear and tear of an asset. The wear and tear can be because of excessive usage, technological advancement or write down on account of revaluation to represent the market condition. normally depreciation is provided on the basis of an asset's useful life.
• Depreciation = {Cost of asset (-) expected scrap value} ÷ Useful life in years.
• Depreciation can be calculated under several methods like WDV method, SLM method, Weights method etc.
• c. Written down value: Cost (-) depreciation.
• Any fixed assets on the face of a balance sheet will represent the written down value i.e. cost at the time of its purchase net off depreciation for wear and tear.
• Certain exceptions are there like, an asset can be revalued upwardly if it's utility is expected to increase or its value is marked to current market value.
• When you read a financial statement, any interpretation to a fixed asset schedule has to be made in cognisance with the accounting policies given on depreciation rates or useful life

Answer 2

Answer:

Fixed assets are not shown in the books at market value because : (i) as per historical concept, we recorded fixed assets at original cost, and (ii) as per going concern concept, the assets are not going to be sold in the near future, Hence, the market value is irrelevant.