Apr 14, 2016
- Complete the sentences below. Use the key words if necessary.
- Fixed assets
key words
A company's assets are usually divided into like cash and stock or inventory, which will be used or converted into cash in less than a year, and such as buildings and equipment, which will continue to be used by the business for many years.
But fixed assets - become unusable, or become — out of date, and eventually have little or no value. Consequently fixed assets are : their value on a balance sheet is reduced each year by a on the profit and loss account. In other words, part of the cost of the asset is deducted from the profits each year.
The accounting technique of makes it unnecessary to charge the whole cost of a fixed asset against profits in the year it is purchased. Instead it can be charged during all the years it is used. This is an example of the matching principle.
Valuation
key words
Assets such as buildings, machinery and vehicles are grouped together under fixed assets. Land is usually not depreciated because it tends to , or gain in value. British companies occasionally — calculate a new value for — appreciating fixed assets like land and buildings in their balance sheets. The revaluation is at either — how much it would cost to buy new ones, or at (NRV) — how much they could be sold for. This is not allowed in the USA. Apart from this exception, is only recorded in countries that use inflation accounting systems.
Companies in countries which use historical cost accounting — recording only the original purchase price of assets - do not usually record an estimated — the price at which something could be sold today. The conservatism and objectivity principles support this; and where the company is a going concern, the market value of fixed assets is not important. - Depreciation system
key words
The most common system of depreciation for fixed assets is , which means charging equal annual amounts against profit during the lifetime of the asset (e.g. deducting 10% of the cost of an asset's value from profits every year for 10 years).
Many continental European countries allow : businesses can deduct the whole cost of an asset in a short time. Accelerated depreciation allowances are an to investment: a way to encourage it. For example, if a company deducts the entire cost of an asset in a single year, it reduces its profits, and therefore the amount of tax it has to pay. Consequently new assets, including huge buildings, can be valued at zero on balance sheets. In Britain, this would not be considered a true and fair view of the company's assets.
- Fixed assets
- British English or American English?
- fixed assets
- British English
- American English
- property, plant and equipment
- British English
- American English
- fixed assets
- Match the definitions with the words below.
- To record something at a different price — . . .
- appreciate
- fixed assets
- obsolete
- current assets
- revalue
- wear out
- Assets that will no longer be in the company in 12 months' time — . . .
- current assets
- obsolete
- wear out
- fixed assets
- appreciate
- revalue
- To increase rather than decrease in value — . . .
- appreciate
- wear out
- revalue
- fixed assets
- obsolete
- current assets
- Out of date, needing to be replaced by something newer — . . .
- appreciate
- revalue
- wear out
- current assets
- fixed assets
- obsolete
- Assets that will remain in the company for several years — . . .
- wear out
- obsolete
- revalue
- fixed assets
- current assets
- appreciate
- To become used and damaged — . . .
- fixed assets
- appreciate
- revalue
- obsolete
- current assets
- wear out
- To record something at a different price — . . .
- Match the nouns in the box with the verbs below to make word combination
- box
- deduct
depreciate
record
record
reduce
reduce
- box
- Match the two parts of the sentences
- All fixed assets can appreciate if there is high inflation, . . .
- charges equal amounts against profits every year.
- which usually appreciates.
- but historical cost accounting ignores this.
- remove some extremely valuable assets from their balance sheets.
- which encourages them to invest in new factories, etc.
- Accelerated depreciation allows companies to . . .
- charges equal amounts against profits every year.
- but historical cost accounting ignores this.
- remove some extremely valuable assets from their balance sheets.
- which encourages them to invest in new factories, etc.
- which usually appreciates.
- Fixed assets generally lose value, except for land, . . .
- charges equal amounts against profits every year.
- which encourages them to invest in new factories, etc.
- remove some extremely valuable assets from their balance sheets.
- which usually appreciates.
- but historical cost accounting ignores this.
- The straight-line method of depreciation . . .
- which usually appreciates.
- which encourages them to invest in new factories, etc.
- remove some extremely valuable assets from their balance sheets.
- but historical cost accounting ignores this.
- charges equal amounts against profits every year.
- Accelerated depreciation reduces companies' tax bills, . . .
- which usually appreciates.
- which encourages them to invest in new factories, etc.
- charges equal amounts against profits every year.
- but historical cost accounting ignores this.
- remove some extremely valuable assets from their balance sheets.
- All fixed assets can appreciate if there is high inflation, . . .
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