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Fixed asset accounting is a most important part of a any company's financial accounting and reporting system because fixed, or long-term, assets generally represent substantial investments. A company's top management usually asks department heads and finance managers to establish fixed asset accounting procedures that conform to accounting principles, industry standards and governmental directives.
Fixed Asset accounting involves the following main aspects:
- Acquisition of a Fixed Asset: You need to consider the capitalization of incidental costs, treatment of assets acquired in foreign exchange, treatment for leased assets, etc.
- Depreciation: There may be separate rates of depreciation for Company Law and Income Tax purposes etc etc
- Retirement of Assets: You need to consider the treatment of profit/ loss on sale of asset, writing back the accumulated depreciation pertaining to the asset sold, etc.
- Other than these you have other aspects too:
- The Inventory Process
- Financial Reporting : Two accounts is mostly important in BS and P & L context, which is as discussed below.
- Balance sheet accounts: the net value of the asset (carrying amount or book value of the asset) is preserved through two accounts:
- Gross (acquisition) cost
- Accumulated depreciation
- Income statement account
- Depreciation expense of the current year
- Balances and details of these accounts are used in supplementary disclosures in the notes to the accounts.
Next post you will see the greatest and latest accounting details for Oracle EBS 11i/R12 for different.