‘Fixed assets are a source of future economic benefits obtained or controlled as a result of past transactions.’ Discuss.

FUTURE ECONOMIC BENEFITS WITH RESPECT TO THE FIXED ASSETS

Fixed assets are such items like property , plant equipment engaged by business entity . These will be generated when the expansion of revenue occurred . The fixed assets are qualified only when it has anticipated useful life for more than one year and has significant value . When the fixed assets are in use , the original shape shall be retained . The International Accounting Standard (IAS ) 16 described that fixed assets are whose future economic befit is probable to flow into entity and whose cost can be

measured reliably . The said assets are tangible items and held for use in the production

While calculating cost of item of such property (fixed assets ) and the asset is recognized only when the future economic benefits expected and the cost of the item is measured reliably . Accumulation of fixed assets always advantageous so that they will deliver future economic benefits It is chain system of past transactions . The starting of the business with the initial investment make contributions towards fixed assets . The fixed assets will not give immediate benefit in the current nature . It is regular process and flow that future benefits can be achieved from the fixed assets . From such benefits again the fixed assets can be purchased . Hence it is chain system . Always the benefits or profits cannot be distributed . The so derived benefits can be used for purchase of fixed assets

The future economic benefits also depend upon the system of depreciation also . Depreciation is an allocation of some amount on asset over its useful life . Some assets qualify for 25 and some qualify 100 for one year . The amount of depreciation is cost an asset after deduction residual value . The depreciation should be allocated separately for each asset . The methods of deprecation may be fixed and diminish methods . The method of depreciation reflects on the asset 's future economic benefits The future economic benefit also depends upon the selection of accounting methods , besides depreciation methods . There are three types of accounting methods like Assets without amortization , asset with systematic amortization and assets with immediate write off

In accounting terminology , asset whether it is fixed or current whatever it may be which can product future economic benefit . It can be said that it is economic source controlled by the organization derived as a result of past transactions . The assets are controlled by the organization through asset tracking tools . The asset tracking tools monitor the assets from purchasing level to disposal level , which involves different stages like purchasing , upgrading , servicing , licensing , disposal etc the assets may be physical assets or non physical assets like intellectual property rights etc

The fixed assets are purchased for continuous and long-term use , which contributes the earning of profit in the business . It can also be termed as PPE i .e . property , plant and Equipment . The measurement of value of economic benefit is not possible then it can be measured indirectly by reference to the cash paid by the employer to...