February 25, 2020, 12:09:24 pm

ACCOUNTING FOR FIXED ASSETS

Started by TechShristi, September 09, 2011, 04:52:00 pm

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TechShristi

September 09, 2011, 04:52:00 pm Last Edit: January 01, 1970, 05:30:00 am by Guest
ACCOUNTING FOR FIXED  ASSETS (AS-10)

1.  Fixed assets shall be shown in financial statements at historical cost less depreciation.

2.  What is  Historical cost:  The historical cost consists of the following:

a.  Purchase price.
b.  Import duties and other non-refundable taxes.

c.      Cost of bringing the asset to the working condition like: Site preparation, Delivery cost, Installation cost, Expenditure incurred on test runs less  income by sale of products, Administrative   overheads   specifically   attributable   for   construction/ acquisition/installation.
d.  Reduce Govt. grants received/receivable against fixed assets. e.  Price adjustments, changes in duties etc.
3.  Self - Constructed  Assets: Cost of self-constructed assets shall not include any internal profit.

4.  Accounting treatment of first  time Revaluation:

a.  Upward: Increase in net book value is credited to ,,Revaluation Reserve?.

b.  Downward: Decrease in net book value is charged to the profit & loss account.

6.  Valuation of  fixed  assets in special cases:

a.  Assets acquired on hire purchase terms: Such assets are recorded at their cash price.
Further, Shown in Balance Sheet - indicating full ownership does not exist.
b.  Cost  of  jointly  held  assets:  The original cost, accumulated depreciation, and written down value should be stated in the b/s in the proportion of entities ownership.
c.  Fixed  assets  acquired  at  consolidated  price:  Cost  of each  fixed  asset should  be determined on a fair basis as per valuation by competent valuer?s.
d.  Cost  of  assets  acquired  in exchange  of  assets:  Assets acquired should be recorded either at fair market value of asset given up or book value  of asset given up, which ever is lower. ADD/LESS: Any additional payment or receipt.

e.  Fixed  Assets  acquired  in exchange  of shares or other  securities:  When payment of fixed assets is made in shares or securities, assets should be recorded either at Fair market value of asset acquired or Fair market value of shares or securities issued, whichever is clearer.
 
7.  Goodwill:  Is recorded

a.  Only when consideration is paid, or when excess is paid over net assets acquired. b.  Is written-off over a period as a matter of financial prudence.
8.  Patents:

a.  On purchase, recorded at - At Purchase price, Incidental expenses, Stamp cost, etc. b.  On in house development, recorded at - All Related expenses.
c.  Written - off over their legal life or useful life whichever is less.

9.  Known-how:

g.  On purchase, recorded at - At Purchase price, Incidental expenses, Stamp cost, etc. h.  On in house development, recorded at - All Related expenses
i.   To be written off:

i.   Relating to manufacturing process - in the year in which it is incurred.

ii.  Relating to Plans, designs & drawings of buildings or plant & machinery - To be capitalised & depreciated.

Note:  Composite  payments  (manufacturing  process  &  plans,  designs  etc.)  are  to  be apportioned.

10.Addition or  extension to  an  existing asset:

a.  If integral  part of existing  asset: Added to gross book value of existing assets.

b.  If having separate identity and capable to be used after the disposal of existing asset - it is accounted for separately.

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TechShristi

September 09, 2011, 04:52:00 pm Last Edit: January 01, 1970, 05:30:00 am by Guest

Mr. Patel

September 09, 2011, 05:06:40 pm #1 Last Edit: January 01, 1970, 05:30:00 am by Guest
Thanks dear,
can you give me some notes on accounting standard 26 and 28?

and please tell me why did we charge the Depreciation?

Mr. Patel

September 09, 2011, 05:06:40 pm #1 Last Edit: January 01, 1970, 05:30:00 am by Guest

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