Why Fixed Assets are not shown in the books at Market Value ?
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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.
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We are asked the reason why the fixed assets are not shown at Market Value. The reasons for not showing the fixed assets at market value will be as under:
- Fixed assets are the assets of a business that are fixed in nature.
- Examples of fixed assets can be buildings, land, machinery, furniture, etc.
- These assets when used in the business get depreciated because of wear and tear or even if they are not used they may become obsolete.
- So the depreciation on these assets requires to be calculated and subtracted from the value of fixed assets in the balance sheet.
- There may also be cases where the asset value appreciates, like the case of land and building.
- Even this value requires to be calculated and added to the value of the fixed asset.
- For these above reasons, fixed assets are not shown at market value.
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Answered by
0
We are asked the reason why the fixed assets are not shown at Market Value. The reasons for not showing the fixed assets at market value will be as under:
- Fixed assets are the assets of a business that are fixed in nature.
- Examples of fixed assets can be buildings, land, machinery, furniture, etc.
- These assets when used in the business get depreciated because of wear and tear or even if they are not used they may become obsolete.
- So the depreciation on these assets requires to be calculated and subtracted from the value of fixed assets in the balance sheet.
- There may also be cases where the asset value appreciates, like the case of land and building.
- Even this value requires to be calculated and added to the value of the fixed asset.
- For these above reasons, fixed assets are not shown at market value.
#SPJ6
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