Fixed Assets are purchased for long term and business operations purpose to generate income and which cannot be easily converted into cash, such as furniture, plant and machinery, land, building and office equipment etc.
Types of Fixed Assets
There are two types of fixed assets
Tangible fixed assets: Where you can see and touch the assets called Tangible assets. Example, building, plant & machinery and furniture.
Intangible fixed assets: Where you cannot see and touch the assets called Intangible assets. Example, goodwill, trademarks & copyrights etc.
What is the journal entry for purchasing of fixed asset?
Fixed Asset A/c Dr
CGST A/c Dr
SGST A/c Dr
To Vendor A/c
What is the journal entry for depreciation?
Depreciation A/c Dr
Accumulated Depreciation A/c
What is the journal entry for profit on sale of fixed asset?
Bank A/c Dr
Accumulated Depreciation A/c Dr
To Fixed Asset A/c
To Gain on Sale of Fixed Asset A/c
What is depreciation?
Depreciation is a systematic reduction of value from fixed asset due to wear and tear.
What are the different depreciation methods?
Straight Line Method
Reducing Balance Method
Units of Production Method
What is accumulated depreciation?
Accumulated depreciation is the total depreciation of an asset that has been charged to expense since its date of acquisition. It is a contra asset account it appears on the balance sheet under fixed assets with the credit balance. The depreciation entry will be depreciation account debit and accumulated depreciation account is credit.
What are fictitious assets?
Fictitious assets are not assets, they are shown on the asset side of the balance sheet. They are expenses and losses which couldn’t be written off during the current accounting period.
Promotional expenses of a business
Loss incurred on issue of debentures
Discount allowed on issue of shares
What is straight line depreciation method?
Straight line method is the most commonly used depreciation method. The fixed asset value reduced gradually over the useful life of the asset.
To calculate the straight line depreciation, you need to consider the asset purchase value, salvage value and useful life of asset.
Straight line depreciation: Purchase value – Salvage value/Useful life of asset