Accounting for Fixed Assets and Depreciation Chapter 9 Quiz

What are the two broad classifications of assets mentioned in the text?

What concept arises from splitting up the cost of a Fixed Asset over the periods during which benefits will be derived from such asset?

Which assets provide beneft over multiple accounting periods, instead of one accounting period?

Which accounting standard deals with Fixed Assets in India?

Which type of assets are subject to depreciation, according to the text?

What is the main purpose of recording and reporting fixed assets in financial accounting, as mentioned in the text?

What governs the accounting for fixed assets and depreciation in India?

What are considered as fixed assets?

What is the basic accounting for fixed assets related to?

How are fixed assets accounted for when purchased on cash basis?

What is the journal entry for acquiring fixed assets by exchange?

What may result in a loss when acquiring fixed assets by exchange?

How are fixed assets which are constructed/developed by an entity recorded in the books?

What standard governs the accounting for fixed assets and depreciation in India?

What is considered as tangible fixed asset?

Classification of Assets

Assets are broadly classified into two categories: Fixed Assets and Current Assets

Depreciation

Depreciation arises from splitting up the cost of a Fixed Asset over the periods during which benefits will be derived from such asset
Depreciation is applicable to Fixed Assets that provide benefits over multiple accounting periods

Accounting Standards

Accounting Standard (AS) 10 deals with Fixed Assets in India
Accounting for fixed assets and depreciation in India is governed by the Companies Act, 2013 and the applicable Accounting Standards

Fixed Assets

Fixed Assets are assets that provide benefits over multiple accounting periods, instead of one accounting period
Fixed Assets are subject to depreciation
The main purpose of recording and reporting fixed assets in financial accounting is to match the cost of the asset with the revenue generated by the asset over its useful life
Fixed Assets are considered as tangible assets
Examples of fixed assets include land, building, machinery, and equipment

Accounting for Fixed Assets

Basic accounting for fixed assets is related to the acquisition, use, and disposal of fixed assets
When purchased on cash basis, fixed assets are accounted for by debiting the Fixed Asset account and crediting the Cash account
When acquired by exchange, the journal entry is to debit the Fixed Asset account and credit the Asset given in exchange
A loss may result when acquiring fixed assets by exchange, if the carrying value of the asset given in exchange is more than its fair value
Fixed assets constructed/developed by an entity are recorded in the books at their cost, which includes all costs incurred until the asset is ready for use

Test your knowledge of accounting for fixed assets and depreciation with this quiz. Learn about the classification of assets, particularly fixed assets, and their importance in entity operations.