A.S.

10
 VSIT
VIDYALANKAR SCHOOL
OF INFORMATION
TECHNOLOGY.
[VIDYALANKAR MARG, WADALA-(E).
MUMBAI-400 037.]
SUBJECT: FINANCIAL ACCOUNTING.
TEACHER INCHARGE: VIJAY GAWDE.
GROUP NO: 9
MEMBER’S NAME:
YASH-6
ROHIT-41
NIKITA-9
MOHITOSH-7
VISHAKHA-31
1.INTRODUCTION.
2.WHAT ARE ACCOUNTING STANDARDS.
3.DEFINITION & EXPLANATION.
4.WHAT ARE FIXED ASSETS.
5.IDENTIFICATION OF FIXED ASSETS.
6.COMPONENTS OF COST.
7.SELF-CONSTRUCTED FIXED ASSETS.
8.NON-MONETARY CONSIDERATIONS.
9.IMPROVEMENTS & REPAIRS.
10.VALUATION OF FIXED ASSETS.
11.DISCLOSURE.
 INTRODUCTION.
1.Financial statements disclose certain information relating to
fixed assets. In many enterprises these assets are grouped into
various categories such as land, buildings, goodwill, patents, etc..
This statement deals with accounting for such fixed assets.
2.This statement does not deal with the specialized aspects of
accounting for fixed asset that arises under a comprehensive
system reflecting the effects of changing prices but applies to
financial statements prepared on historical cost basis.
3.This statement does not deal with accounting for the following
items to which special considerations apply:
i-forest, plantations, natural resources..
ii-wasting assets including mineral rights, oil, natural gas.
iii-expenditure on real estate development & livestock.
4.This statement does not deal with govt. grants & subsidies. It
only makes a brief reference to the amalgamation or merger.
 WHAT ARE ACCOUNTING STANDARDS &
OBJECTIVES.
These are the principles that is prescribed by the ICAI to be followed
in preparation & presentation of financial statement. These are
statements of code of practice of the regulatory accounting bodies
that are to be observed during the presentation. In layman’s term
accounting standard are the written documents issued by the expert
institutes or other regulatory bodies covering various aspects of
measurements, treatment & disclosure of accounting transactions.

OBJECTIVES.
The basic objective of accounting standards is to remove variations in
the treatment of several accounting aspects and to bring about
standardization in presentation. They intent to harmonize the diverse
accounting policies followed in preparation & presentation of financial
statements by different reporting enterprises so as to facilitate intra-
firm and inter-firm comparison.
 DEFINITION & EXPLANATION.

Fixed asset is an asset held with the intention of being used for
the purpose of producing or providing goods or services and is not
held for sale in the normal course of business.

EXPLANATION.

Fixed assets often comprise a significant portion of the total asset

of an enterprise and therefore are important in the presentation
of financial position. Furthermore the determination of whether an
expenditure represents an asset or an expense can have a
material effect on an enterprise’s reported result of operations.
 WHAT ARE FIXED ASSETS?

A long term tangible piece of property that a firm owns and uses
in the production of its income & is not expected to be consumed
or converted into cash any sooner than at least one year’s time.
Fixed assets are sometimes collectively referred to as ‘plant,
building, machinery, are good examples of fixed asset.
Generally, intangible long term assets such as trademarks &
patents are not categorized as fixed assets but are more
specifically referred as intangible assets.
Long lived property owned by a a firm that is used by a firm in
the production of its income. Tangible fixed assets include real
estates, plant and equipments. Intangible fixed assets include
patents, trademarks, customer recognition etc..
 IDENTIFICATION OF FIXED ASSETS.

1.Gives criteria determining whether items are to be

classified as fixed asset. Judgment is required in applying
the criteria to specific circumstances or specific types of
enterprises. It may be appropriate to aggregate
individually insignificant items, & to apply the criteria to
the aggregative value. An enterprise may decide to
expense an item which could otherwise have been
included as fixed asset, because the amount of the
expenditure is not material.
 COMPONENTS OF COST.
The cost of an item of fixed asset comprises its purchase price,
including import duties & other non-refundable taxes or levies & any
directly attributes cost of bringing the asset to its working condition
for its intended use: any trade discounts and rebates are deducted in
arriving at the purchase price.
i-site preparation.
ii-initial delivery & handling cost.
iii-installation cost, such as special foundations for plant.
iv-professional fees.
The cost of fixed asset may undergo changes subsequent to its
acquisition or construction on account of exchange fluctuations, price
adjustments, changes in duties or similar factors.
 SELF-CONSTRUCTED FIXED ASSET.
In arriving at the gross book value of self-constructed fixed asset, the
same principles include in the gross book value are cost of
construction that relate directly to the specific asset & cost that are
attributes to the construction activity in general & can be allocated to
the specific asset. Any internal profits are estimated in arriving at
such costs.

NON-MONETARY CONSIDERATION.
When a fixed asset is acquired in exchange for another asset, its cost
is usually determined by reference to the fair market value of the
consideration given. It may be appropriate to consider also the fair
market value of the asset acquired if this is more clearly evident. An
alternative accounting treatment that is sometimes used for an
exchange of asset, particularly when the asset exchanged are similar,
is to record the asset acquired at the net book value of the asset
given up in each case an adjustment is made for any balancing
receipt or payment of cash or other consideration.
 IMPROVEMENT & REPAIRS.

Frequent, it is difficult to determine whether subsequent expenditure

related to fixed asset represents improvement that ought to be
added to the gross book value or repairs that ought to be charged to
the P/L statement. Only expenditure that increases the future
benefits from the existing asset beyond its previously assessed
standard of performance is included in the gross book value.

The cost of an addition or extension to an existing asset which is of a

capital nature and which becomes an integral part of the existing
asset is usually added to its gross book value. Any addition or
extension, which has a separate identity and is capable of being used
after the existing asset is disposed of, is accounted for separately.
 VALUATION OF FIXED ASSET.

In the case of fixed asset acquired on hire purchase terms, although

legal ownership does not vest in the enterprise , such asset are
recorded at their cash rate of value, which if not readily available, is
calculated by assuming an appropriate rate of interest . They are
shown in the balance sheet with an appropriate narration to include
that the enterprise does not have full ownership thereof.

Where an enterprise owns a fixed asset jointly with others the extent
of its share in such assets, and the proportion in the original cost,
accumulated depreciation and written down value are stated in the
balance sheet.

Where several assets are purchased for a consolidate price, the

consideration is apportioned to the various assets on a fair basis as
determined by competent value.
 DISCLOSURE.

Certain specific disclosures on accounting for fixed asset are

already required by IACI . Further disclosures that are
sometimes made in financial statement include:
1. Gross & net book values of fixed asset at the beginning & end of
an accounting period showing additions, disposals, acquisition, &
other movements.
2. Expenditure incurred on account of fixed asset in the course of
construction or acquisition.
3. Revalued amounts substituted by historical costs of fixed assets,
the method adopted to compute the relevant amounts, the
nature of any indices used, the year of any appraisal made, &
whether an external value was involved in case where fixed
asset are stated at relevant amounts.
VARIOUS BOOKS.
1. N.RAMACHANDRA & RAM KUMAR KAKANI’S..
2. VIPUL PRAKASHAN..

INTERNET.
1. GOOGLE.COM
2. ASK.COM
3. CASPL.IN.

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