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Cronologia dei costi e non - la valutazione dell'asset corrente

  • Note di Apprendimento
  • Revisione degli argomenti
    BabaJide Martins F.
    TR
    BabaJide Martins F.

    It is new to me but I will catch up.

    Alice B.
    GQ
    Alice B.

    The principle of historical cost is an important point as it values non-current assets regarding the cost at which it was acquired.

    Alice B.
    GQ
    Alice B.

    Accounting cost is the process of analysing, evaluating, collecting, summarizing the various alternative courses of action, and its goal is to advise the management on the most appropriate course of action based on the cost, efficiency and capability.

    Hermina S.
    LC
    Hermina S.

    This topic is new to me so some stuff may be a challenge but has an open mind to learning.

    Morne V.
    ZA
    Morne V.

    This topic is new to me so some stuff may be a challenge but has an open mind to learning.

    Sunday O.
    NG
    Sunday O.

    accounting begin

    Odongo M.
    UG
    Odongo M.

    Accounting -> Historical cost and non-current asset valuation Historical cost and non-current asset valuation In preparing reports, we are currently guided by the historical cost principle. This principle states that non-current assets should be valued at the cost at which the asset was acquired. This cost includes costs involved in getting the asset ready for use. For instance, if you were to buy a combustion stove for your restaurant at a cost of $1500 it may also cost you a further $400 to have the stove installed. The depreciable cost of the stove becomes $1900. The advantage of using historical cost is that it is based on objective evidence rather than subjective opinion. However, the problem with some non-current assets such as property is that they usually increase in value over a number of years. This creates problems when assessing the performance of a business. Supposing a business has a net profit of $30 000 and total assets of $300 000. The ROA (return on assets) is 10% and in the absence of other information may be regarded as satisfactory. However, the $300 000 in assets may include premises valued (historical cost) at $200 000. The assets may have been bought in 1979 and may be 'worth' seven times that amount today, $1 400 000. If that information was reported in the balance sheet total assets would be $1 500 000. The ROA would be 2% and much less likely to be regarded as satisfactory. This information may substantially affect decision making in the business. The business may now consider selling the premises and ending the business, renting elsewhere or seeking a more profitable activity. The decision to reflect more current values for non-current assets is an aspect of current cost accounting. Using this approach the business attempts to show the non-current asset at current or replacement values. This has certain ramifications. Depreciation also has to be adjusted to allow for changes in current values. This brings into question the purpose of depreciation itself. Is it intended to allocate the cost of the asset over the life of the asset? This is the definition currently used. If the depreciation is based on current or replacement values then this suggests the purpose is to provide for the replacement of the asset. This is a purpose not currently met. What happens if you do not intend to replace the asset or if you do, with a more expensive asset? There are no ready answers for these questions. Assessment of performance becomes more difficult if the base against which profit is measured constantly changes. Is the improvement in performance due to increased profit or decreased asset valuation? The use of ratios, as a measure of performance, loses its value with these changes and a careful examination of actual reports becomes important. Finally who carries out these valuations and is the expense for a sole trader justified? Example A business upwardly values premises by $20 000. Premises 20 000 Capital 20 000 Revaluation of premises

    Manish K.
    NP
    Manish K.

    Course is clearly understood.

    Davidson Ade O.
    NG
    Davidson Ade O.

    the advantage of using historical cost is that it base on objective evidence rather than subjective opinion.

    Penelope M.
    US
    Penelope M.

    i agree

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