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Why isn't purchase of fixed asset treated as expense in the period in which the purchase was made?
Suppose the fixed asset is a machine, which will be used to produce goods, which will be sold at a profit. The sales will be recorded as the products are sold during the economic lifetime. Hence, the purchase price of the fixed asset needs to be allocated (spread) over the economic lifetime as well. The expense is called depreciation expense.
What else can I help you with?
How do you treat a purchase of a new component of a fixed asset?
As per IAS 16: If purchase of component of fixed asset is major part of original asset or purchase of component increase the effectiveness or live of asset then it is treated as a part of original price and treated as asset. If purchase of component is routine purchase for small repair etc then it is treated as revenue expense.
Is purchase returns an asset or liability?
purchase return is assets or liability or expense
What is the difference between an expense and an asset?
An asset will have benefits extending into the next accounting period
Unexpired insurance at the end of the fiscal period represents is it an accured asset liability expense or deferred expense?
deferred nexpense
Is Unexpired insurance for the fiscal period represents asset expense?
Unexpired insurance for the fiscal period is considered an asset, specifically a prepaid expense, rather than an expense. This is because it represents a payment made for insurance coverage that extends beyond the current accounting period, providing future economic benefits. As time passes and the coverage period elapses, the prepaid insurance will then be recognized as an expense in the income statement.
Is depreciation expense an asset or liability?
Depreciation expense is neither an asset or liability. It is an expense.
Why should depreciaon be treated as expense?
Depreciation should be treated as expense because the worth of the asset like machinery and building goes down as time goes by. This reduction in the amount cannot be collected by anyone and cannot be claimed. The company only has to bear this amount. Because of this depreciation is treated as an expense.
When do you expense an asset?
preliminary expense is the expense for fitting the asset or similar works, so this expenses capitalized.... and is called fixed asset
Is prepaid rent is asset?
Yes, any expense paid in advance is current asset as the actual benefit will be taken in future time period.
Is utilities asset or expense?
Expense
Is warranty expense a current or non-current asset?
An expense is not an asset at all.
What is the Difference between asset method and expense method?
the asset method = record all purchases as asset then recognize expense (diff of beg bal & end bal) dr. prepaid supply (purchase) cr. cash expense method = record all purchases as expense, then account for the ending balance. adjust beg balance to reflect end balance. dr. supply expense cr. cash
