Analysis of Fixed Asset Management with Traditional Financial Statement

Authors

  • Deepa Damodaran Assistant Professor, Department of Commerce, School of Commerce, Guru Nanak College (Autonomous), Chennai, Tamil Nadu, India.
  • R. Regin Assistant Professor, Department of Computer Science and Engineering, SRM Institute of Science and Technology, Ramapuram, India.
  • S. Suman Rajest Professor, Dhaanish Ahmed College of Engineering, Chennai, Tamil Nadu, India.

Keywords:

Fixed assets management, Accounting concept, liquidity, Going-concern concept

Abstract

: Fixed Assets Management is the conventional financial statement for a business. While these statements do a good job of detailing the company's financial activities, they do not reveal how the company's financial status has changed over time, which is a big downside. The book and actual realisable values of fixed assets are determined when they are acquired for usage in the company to generate sales. The present realisable value of fixed assets, however, becomes critical when a business unit is deemed no longer viable and must be liquidated. Closely related to the going concern notion is the cost principle of accounting, a fundamental accounting concept. This concept states that the initial cost to acquire a fixed asset is the starting point for all subsequent accounting treatment of the asset. While this definition does not mandate that fixed assets be reported at cost in all cases, it does state that cost will serve as the basis for all potential cost estimates. The book and actual realisable values of fixed assets are determined when they are acquired for usage in the company to generate sales. The current realisable value of fixed assets is critical, nevertheless, when a business unit has to be liquidated because it is no longer viable. There is a strong relationship between the going concern notion and the cost principle, two fundamental accounting concepts. This concept states that the initial cost to acquire a fixed asset is the starting point for all subsequent accounting treatment of the asset. While this definition does not mandate that fixed assets be reported at cost in all cases, it does state that cost will serve as the basis for all potential calculations. Despite the implication that cost would serve as the starting point for all calculations, this statement does not always imply that the fixed asset will always be seen at cost.

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Published

2024-07-03