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VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY.
[VIDYALANKAR MARG, WADALA-(E). MUMBAI-400 037.]
SUBJECT: FINANCIAL ACCOUNTING. TEACHER INCHARGE: VIJAY GAWDE. GROUP NO: 9 MEMBER’S NAME: YASH-6 ROHIT-41 NIKITA-9 MOHITOSH-7 VISHAKHA-31
1.INTRODUCTION. 2.WHAT ARE ACCOUNTING STANDARDS. 3.DEFINITION & EXPLANATION. 4.WHAT ARE FIXED ASSETS. 5.IDENTIFICATION OF FIXED ASSETS. 6.COMPONENTS OF COST. 7.SELF-CONSTRUCTED FIXED ASSETS. 8.NON-MONETARY CONSIDERATIONS. 9.IMPROVEMENTS & REPAIRS. 10.VALUATION OF FIXED ASSETS. 11.DISCLOSURE.
1.Financial statements disclose certain information relating to fixed assets. In many enterprises these assets are grouped into various categories such as land, buildings, goodwill, patents, etc.. This statement deals with accounting for such fixed assets. 2.This statement does not deal with the specialized aspects of accounting for fixed asset that arises under a comprehensive system reflecting the effects of changing prices but applies to financial statements prepared on historical cost basis. 3.This statement does not deal with accounting for the following items to which special considerations apply: i-forest, plantations, natural resources.. ii-wasting assets including mineral rights, oil, natural gas. iii-expenditure on real estate development & livestock. 4.This statement does not deal with govt. grants & subsidies. It only makes a brief reference to the amalgamation or merger.
WHAT ARE ACCOUNTING STANDARDS & OBJECTIVES.
These are the principles that is prescribed by the ICAI to be followed in preparation & presentation of financial statement. These are statements of code of practice of the regulatory accounting bodies that are to be observed during the presentation. In layman’s term accounting standard are the written documents issued by the expert institutes or other regulatory bodies covering various aspects of measurements, treatment & disclosure of accounting transactions.
The basic objective of accounting standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in preparation & presentation of financial statements by different reporting enterprises so as to facilitate intrafirm and inter-firm comparison.
DEFINITION & EXPLANATION.
Fixed asset is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business.
Fixed assets often comprise a significant portion of the total asset of an enterprise and therefore are important in the presentation of financial position. Furthermore the determination of whether an expenditure represents an asset or an expense can have a material effect on an enterprise’s reported result of operations.
WHAT ARE FIXED ASSETS?
A long term tangible piece of property that a firm owns and uses in the production of its income & is not expected to be consumed or converted into cash any sooner than at least one year’s time. Fixed assets are sometimes collectively referred to as ‘plant, building, machinery, are good examples of fixed asset. Generally, intangible long term assets such as trademarks & patents are not categorized as fixed assets but are more specifically referred as intangible assets. Long lived property owned by a a firm that is used by a firm in the production of its income. Tangible fixed assets include real estates, plant and equipments. Intangible fixed assets include patents, trademarks, customer recognition etc..
IDENTIFICATION OF FIXED ASSETS.
1.Gives criteria determining whether items are to be classified as fixed asset. Judgment is required in applying the criteria to specific circumstances or specific types of enterprises. It may be appropriate to aggregate individually insignificant items, & to apply the criteria to the aggregative value. An enterprise may decide to expense an item which could otherwise have been included as fixed asset, because the amount of the expenditure is not material.
COMPONENTS OF COST.
The cost of an item of fixed asset comprises its purchase price, including import duties & other non-refundable taxes or levies & any directly attributes cost of bringing the asset to its working condition for its intended use: any trade discounts and rebates are deducted in arriving at the purchase price. i-site preparation. ii-initial delivery & handling cost. iii-installation cost, such as special foundations for plant. iv-professional fees. The cost of fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments, changes in duties or similar factors.
SELF-CONSTRUCTED FIXED ASSET.
In arriving at the gross book value of self-constructed fixed asset, the same principles include in the gross book value are cost of construction that relate directly to the specific asset & cost that are attributes to the construction activity in general & can be allocated to the specific asset. Any internal profits are estimated in arriving at such costs.
When a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the fair market value of the consideration given. It may be appropriate to consider also the fair market value of the asset acquired if this is more clearly evident. An alternative accounting treatment that is sometimes used for an exchange of asset, particularly when the asset exchanged are similar, is to record the asset acquired at the net book value of the asset given up in each case an adjustment is made for any balancing receipt or payment of cash or other consideration.
IMPROVEMENT & REPAIRS.
Frequent, it is difficult to determine whether subsequent expenditure related to fixed asset represents improvement that ought to be added to the gross book value or repairs that ought to be charged to the P/L statement. Only expenditure that increases the future benefits from the existing asset beyond its previously assessed standard of performance is included in the gross book value. The cost of an addition or extension to an existing asset which is of a capital nature and which becomes an integral part of the existing asset is usually added to its gross book value. Any addition or extension, which has a separate identity and is capable of being used after the existing asset is disposed of, is accounted for separately.
VALUATION OF FIXED ASSET.
In the case of fixed asset acquired on hire purchase terms, although legal ownership does not vest in the enterprise , such asset are recorded at their cash rate of value, which if not readily available, is calculated by assuming an appropriate rate of interest . They are shown in the balance sheet with an appropriate narration to include that the enterprise does not have full ownership thereof. Where an enterprise owns a fixed asset jointly with others the extent of its share in such assets, and the proportion in the original cost, accumulated depreciation and written down value are stated in the balance sheet. Where several assets are purchased for a consolidate price, the consideration is apportioned to the various assets on a fair basis as determined by competent value.
Certain specific disclosures on accounting for fixed asset are already required by IACI . Further disclosures that are sometimes made in financial statement include: 1. Gross & net book values of fixed asset at the beginning & end of an accounting period showing additions, disposals, acquisition, & other movements. 2. Expenditure incurred on account of fixed asset in the course of construction or acquisition. 3. Revalued amounts substituted by historical costs of fixed assets, the method adopted to compute the relevant amounts, the nature of any indices used, the year of any appraisal made, & whether an external value was involved in case where fixed asset are stated at relevant amounts.
1. N.RAMACHANDRA & RAM KUMAR KAKANI’S.. 2. VIPUL PRAKASHAN..
1. GOOGLE.COM 2. ASK.COM 3. CASPL.IN.
SUBJECT TEACHER & VSIT LIBRARY.
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