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Simple Business

Asset Re valuations
In general, assets that are purchased are placed on the balance sheet at their
cost value.
Each period a depreciation e xpense is included in the profit -and-loss
statement, wh ile the value of the asset is reduced by the equivalent amount.
However, in so me cases the value of an asset may rise or fall by significant
amounts, and the value of the asset in the balance sheet may be changed.
This happens particularly with properties, investments such as holdings of
shares, in with fore ign assets or liabilities due to changes in the exchange
The new valuation may be based on an independent valuation, a calculation
such as a share price or currency exchange rate, or a “director's valuation”
which is an estimate of the value made within the company.
In these cases, the value of the asset on the balance sheets is updated to
reflect the new value.
(** check inc lusion in P/ L account) Profit & Loss Statement
The profit and loss statement records the income and e xpenses th at occurred
during a period.
This includes all cash transactions, and also items reflecting the change in the
value of fixed assets.
(** check accounting treatment of asset revaluations – p/l entry yes/no)
Depreciat ion is recorded as an expense, reflecting the reduction in the value
of assets during the period.
Depreciat ion does not represent an actual cash transaction, and applies to the
entire period, rather than a specific date.
Amort isation is a similar e xpense to depreciation, but applies to inta ngible
assets such as goodwill, patents and licenses.