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Future economic benefits occur when the risks and rewards of the asset's ownership have passed to the entity. [5] The standard also discusses the accounting treatment of parts of property, plant and equipment which may require replacement at regular intervals and the capitalisation of inspection costs. [1]
A fixed asset, also known as long-lived assets or property, plant and equipment (PP&E), is a term used in accounting for assets and property that may not easily be converted into cash. [1] Fixed assets are different from current assets, such as cash or bank accounts, because the latter are liquid assets. In most cases, only tangible assets are ...
Property, plant and equipment is recorded at its historical cost. [4] Cost includes:- Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating.
This accounting definition of assets includes items that are not owned by an enterprise, for example a leased building (Finance lease), but excludes employees because, while they have the capacity to generate economic benefits, an employer cannot control an employee. In economics, an asset (economics) is any form in which wealth can be held.
For United States Federal government accounting, capital assets have been defined including land (including parklands), structures, equipment (including motor and aircraft fleets), and intellectual property (including software), that have an estimated useful life (also known as service life) of two years or more. Capital assets exclude items ...
Cornerstones of Managerial Accounting 4th edition-Chapter 2: Depreciation on plant buildings and equipment, janitorial and maintenance labor, plant supervision, materials handling, power for plant utilities, and plant property taxes. Management accounting by Eldon, Wiley, 1979 - Business & Economics
[citation needed] In accounting, a capital expenditure is added to an asset account, thus increasing the asset's basis (the cost or value of an asset adjusted for tax purposes). Capex is commonly found on the cash flow statement under "Investment in Plant, Property, and Equipment" or something similar in the Investing subsection. [citation needed]
Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering. [4] In the early nineteenth century, these costs were of little importance to most businesses.