Category: Accounting

How to Value Fixed Assets in a Proper Manner? Learn the Facts

Accounting Homework Help
By Phillip L'Hoette
9 Jul, 2017
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Folks, it is very vital for all of us to know much about the Assets. This term is just not associated with the academic studies, also it is going to come in contact with all of us for lifetime no matter in which profession we are into.  It has permanent importance in commercialization.

So, what is an asset?

An Asset is a tangible or intangible product which has some or more monetary and economic value in market. An asset can be possessed by an Individual, group of individuals or Big/Small/Medium firm. An asset is introduced and promoted into business to meet the manufacturing, distributing, providing services and other important / beneficial functions of any business. The original value of the Asset decreases according to usage year by year and this process is known as Depreciation.

Is it little theoretical to understand this concept? Well, we have few general examples and types below which could help in valuation of fixed assets homework answers easily.

Current Assets:

These types of Assets are frequently used in day to day business transactions. Examples are:  Inventory, Bills Receivable, Cash,and Investment etc.

Fixed Assets:

Usage of these Assets too is frequent in business. However, these assets are fixed and occupied at one place itself. They cannot be moved from one place to other. Examples: Land, Building, Machinery, Plants etc.

Tangible Asset:

These kinds of Assets can be seen and touched like Land, Building, Tools, Equipments, Furniture, Cash, and Stock etc.

Intangible Asset:

Assets which cannot be seen and touched, but can be explained and can give benefits to an individual or organization are known as Intangible Assets. Example Copy rights, Good Will, Patent, Brand.

Yes, we’ve got the question spinning in your mind. One asset can fall into one or more of its kind like Stock which is a Current Asset and Tangible Asset too. We are sure that the concept of asset is less blurred and much clearer after the above explanation and would bridge the gap in valuation of fixed assets homework answers.

Let us all learn about valuation of Fixed Assets in detail. As we know now that what exactly are fixed asset, a little added information is required to be mentioned here. Sometimes, fixed assets are also referred as ‘Plants’. Like Buildings, real estate.  Moreover, Trademarks, Copyrights, Good will and Patent can be considered as Fixed Intangible Asset. A company’s reputation and Financial Health is estimated by the Fixed Assets they possess. Stake holders and other Investors undergo evaluation on the possession of Fixed Assets. Long term Income is earned by Fixed Assets hence they are also subject to Depreciation. Every year the original value of the Fixed Asset is decreased and is recorded into the Company’s Balance Sheet.

Folks, we need to keep in mind that valuation of fixed assets is an unaided process in business. The basic purpose of valuation is to determine the true value of the fixed assets so that the same can be evaluated at the specific period of time.  With valuation of fixed assets homework answers we can get a clear idea!

Few reasons for which the valuation of Fixed Assets is done are:

  • To show the true value of fixed assets at the time of Merger, Collaboration, lease or any other purpose in commercialization.
  • For issuing the shares for the existing stakeholders and Investors.
  • Re-sale of the specific fixed asset.
  • Revaluation process is essential for company’s financial health progress and for other regulatory transactions.
  • To lower down the ratio of debt to equity.

Valuation of Fixed Assets can be determined in various ways, few of them are mentioned below:

  • Method of Market Value:

The market price of fixed assets also determines the valuation of Fixed Assets.  If in case, the same kind of fixed asset is rarely found in the market, then it would be little challenging for the concerned team to determine the value of Fixed Assets.

In such cases, for valuation of fixed assets homework answers, there are two methods:

  1. Net Value:

It is the price when the Fixed is sold in the market. However, the expenditure incurred in sale of Asset is not considered.

  1. Replacement Value:

If the value is same of cost and sell, no extra charges are incorporated, this method is known as Replacement Value.

  • Cost Method:

It is little difficult to use this method because the purchase value is considered while revaluation. There is a probability that value of that particular Fixed Asset at the time of purchase is higher and at the time of revaluation is more or less decreased.

  • Few other aspects to be covered are:

Determining the expected life of the fixed asset, estimating the recoverable value of the fixed asset, depreciation and amortization of the particular fixed asset.

Valuation of Fixed Assets documents should have these elements:  Asset Type, Category, Client ID, Unit of Measure, Actual Cost of the Asset, Quantity and Quality of Asset, Date of Acquisition, Estimated future life of Asset, Used life of that Asset, Net fair value, Asset Code, Location of the Asset. All these are mandatory elements to deal with which further enhances the chances for opting for huge commercial loans.

In this digital world, none of the problem is left without any solution whether it is about economy, Social Science or valuation of fixed assets homework answers. We have tried to cater a simple yet useful information about the valuation of Fixed Assets which a deeper and a wider concept to deal with.

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