Name of the student PURU DIXIT

Enrollment No- 13092

BBA, Semester I
(Evening Shift)
Batch : 2014-2017
Subject code -109
Subject Financial accounting
Research Assignment










ACKNOWLEDGEMENT
I offer my sincere thanks and humble regard to Rukmini Devi Institute of advance studies
,GGSIP University , New Delhi for imparting us very valuable professional training in BBA.

I pay my sincere regard to pooja kalra my project guide for giving me the cream of her
knowledge. I am thankful to her as she has been a constant source of advice, motivation and
inspiration . I am also thankful to her for giving her suggestion and encouragement throughout
the project work.
I take the opportunity to express my gratitude and thanks to our computer Lab staff and library
staff for providing me opportunity to utilize their resource for completion of the project.

I am also thankful to my family for constantly motivating me to complete the project and
providing me an environment which enhanced my knowledge.














Question A
Land improvement vs Leasehold Improvement


BASIS LAND IMPROVENTS LEASEHOLD IMPROVEMENTS







QUESTI ON

B. Can a fully depreciated asset be revalued?

1.Defination These are recorded in a general
asset account entitled land
improvements and land
improvements recorded separately
from land because these have
limited life and are depreciated.
Land is assumed not to be
depreciated.
The lease will likely to state that all
improvements to the building will
belong to the owner of the building and
the amount spend by tenant to the
building will record in its asset account
leasehold improvements.
2.Depreciation The depreciation of land improvement
will result in depreciation expense on
the companys income tax return.
This will be depreciated by the tenant over
the useful life of the improvements or over
the life of the lease.
3.Taxable Income This will reduce its taxable income and
will reduce a profitable companys
income tax payments.
The depreciation expense associated with
leasehold improvements will reduce the
tenants taxable income and its income tax
payments if the company is in profits.
4.Examples Land improvements include paved
parking areas ,Driveways ,Fences
,Outdoor Lighting etc.
The permanent improvements to a building
that is being rented under 10 years lease. The
tenant might construct permanent walls and
offices inside the warehouse that it leases
from the owner.


SOLUTION

NO, A fully depreciated asset cannot be revalued because of cost principle, matching principle
and also going concern concept.
The cost principle prevents the company from recording and reporting more than its actual cost
of RS.8,00,000.The matching principle requires that only the actual cost of RS.8,00,000 can be
allocated or matched to the year in which the company benefits from the use of the building.
Lastly, the organisation is assumed to be a going concern and therefore it is not liquidating.
Hence, the amounts which will a firm would receive if it sold the building is not appropriate for
its financial statement. If the current value of building is estimated RS.30,00,000 then the
financial statement must report that the actual cost and depreciation based on that cost. This
means that the Book Value of the building RS.0.
For example, lets assume that a company purchased a building 20 years ago at a cost of
RS.800,000. The company depreciated the building at a rate of 5% P.A. for 20 years. Today the
building continues to be used by the company and it plans to continue using it for many years.
The companys current balance sheet will report the building at its cost RS.8, 00,000 less
accumulated depreciation of RS.800, 000. In other words, the building will report at the book
value of RS.0.






QUESTI ON

C. When should costs be expensed and when should costs be capatalised?

SOLUTION

Cost should be expensed when they are used up or have expired and when they have no future
economic value which can be measured. For example:- The September salaries of a companys
marketing team should be charged to expense September since the value of their September
salaries cannot be determined.

Cost should be capatalised as assets when the costs have not expired and they also have future
economic value. For example:- On 20
th
July a company pays RS.200,000 for property insurance
covering the six months of June through November. The RS.200,000 is initially recorded as the
current asset prepaid insurance. On 31
st
July the company will report this asset atRS.200, 000
since the RS.12 lakhs has a future economic value. on 30
th
June the asset will reported as
RS.100,000 the unexpired cost.