What is a fixed asset?

Fixed asset is a physical item such as a building, soil or vehicle. There are certain rules surrounding the accounting handling of fixed asset. Depreciation, accounting value and tax treatment are all in generally accepted accounting practices or GAAP for each country.

In order to take into account assets, a main book account is usually created for each type of fixed asset. All assets are grouped for the purposes of depreciation and taxation. These fixed property accounts appear in the balance sheet, which increases the value of society. In the case of the installed device, the items incurred for delivery and installation of assets are included in the item. Depreciation is the financial representation of the lost value of the device that occurs over time. To be based on resources that can be reasonably expected if the company ceases to exist. A good example of depreciation is a motor vehicle. A brand new car can be awarded at $ 1,000 (USD) with 0 million. After one year of use is $ 750.

There are many different methods of depreciation that are acceptable within the GAAP. Two commonly used methods are a line and a decreasing balance. Depreciation is used together with fixed assets of assets to ensure that the financial statements are not overvalued.

When the line is depreciated, the purchase price is divided by a life or date of the item. Each year, this value is calculated and entered into the depreciation and subtracted column from the item value. At the end of the life of the item has an accounting value 0.

Using decreasing depreciation balance, the purchase price is multiplied by a standard depreciation rate. Standard rate used at often double the degree of line depreciation. For this reason, the decreasing balance is often called a double decreasing depreciation method.