1.1 BACKGROUND OF THE STUDY
Fixed Assets are those assets of a business which are of material value, like property, plant and equipment and other assets with relatively permanent life acquired by the enterprise for use in production or supply of goods or instructed with intention of being used on a continuing basis or for administrative purpose and many include items held for the resale or for conversion into cash in the ordinary source of business.
However, there are other long lived assets which we cannot see such ones are classified as in tangible assets.
They are: Goodwill, trademark. Be it tangible or intangible all fixed assets represent a bundle of future services which are paid for in advance and used subsequently in the process of generating revenue.
Basically, in a bottling company, there are only three important stages to note down in records of the company as it relates to the fixed assets in liquidation. They are:
- The stage of acquisition of the fixed assets
- The stage of provision for depreciation of fixed assets
- The third stage is the time of the period when the assets must have been useless for the company, then the management can then decide to sell if off and make replacement.
For better understanding of the accounting treatment of fixed assets, its acquisition, depreciation and disposal the researcher has chosen the traditional “T” account to illustrate this point.
Whenever an assets is acquired by a firm, the cost of the assets is always debited to that asset account in the firm’s books and the corresponding entry, will be to credit the cash or bank account.
At the same time, when the asset must have been deemed useless, then it can be sold out as scrap. The cost of the disposal will be credited to the asset account while the cash or bank account of the firm will be debited. The assets depreciation account is equally created. On this, the cost of disposal is debited and the total depreciation by the assets as at the date of disposal credited.
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